German pharmaceuticals giant Bayer is facing its first million-dollar lawsuit arising from the scandal surrounding Lipobay, its anti-cholesterol drug.Mr Mikal Watts, a US lawyer is seeking $500 million (€464 million) in punitive damages in a Texas court on behalf of a client who took the drug before it was taken off the market in August 2001 amid fears that it may have caused the deaths of more than 50 people.

The number of deaths linked to Lipobay has since risen to more than 100. Mr Watts said he had documents that showed the company knew of the health risks associated with taking high-doses of Lipobay as early as 1997, four years before it was withdrawn.

Bayer's chief executive, Mr Werner Wenner, has rejected the allegations that the company ignored safety concerns. If the claims are proven in the Texas court case, expected to last two weeks, it could nullify the company's insurance cover and leave Bayer liable for the massive compensation bill.

Bayer is believed to be facing a compensation bill totalling up to €10 billion as a result of the Lipobay scandal. News that the first lawsuit had been filed sent the company's stock plummeting 12 per cent to €10.81, the stock's lowest level in six years, after already sinking 15 per cent in recent days.

Lawyers for Bayer said earlier this week the company had reached out-of-court settlements totalling $125 million in 450 cases.