The German conglomerate reported fourth-quarter profit fell 78 percent and also forecast the slowest sales growth in several years. Why? Blame was cast on the struggling plastics unit, but the real story is that Bayer’s drug biz isn’t doing so well.

Consider the recent spate of bad news: On Feb. 18, Bayer ended a late-stage trial for its Nexavar cancer med after it failed to improve survival rates in lung-cancer patients. Although already approved to treat liver and kidney cancer, lung cancer offered the biggest market potential. Two days later, Novartis and Novo Nordisk filed a patent lawsuit, claiming Bayer’s Kogenate hemophilia drug infringes on their patents.

Then last week, two new studies in the New England Journal of Medicine, one of which was funded by Bayer, found that heart surgery patients were more likely to die on Trasylol, which is supposed to prevent blood loss during heart bypass surgery. A 2006 study previously linked the drug to higher rates of heart attack, stroke, kidney failure and death, and sales were suspended in November following a scandal over undisclosed data and another trial yielding high death rates.

Ironically, as BusinessWeek notes, these troubles occur after Bayer gambled by purchasing Schering AG in 2006 in hopes of boosting healthcare to offset declines in other businesses. The deal brought an MS treatment and the Yasmin contraceptive. In other words, the drug biz no longer looks like a sure thing, especially with Trasylol lawsuits piling up. Only a blood thinner still being tested shows signs of generating real money. No wonder, then, that Bayer’s stock is off 18 percent this year. “The outlook is really cautious,” Markus Metzger, a Vontobel Securities analyst, tells Bloomberg News. “We expected more. There is no upside.”