Andy, Here what the Washington Post had to say last week on the merger possibilities:
Big Drug Firms Considering
Combination
By David S. Hilzenrath
Washington Post Staff Writer
Wednesday, January 21, 1998; Page C11
SmithKline Beecham PLC and American Home Products
Corp. said yesterday that they are considering a merger, which
would create the nation's largest supplier of prescription drugs
and the global leader in over-the-counter remedies.
The negotiations show that the consolidation of market power
in the health care industry is still in high gear.
Though neither company has been an industry star from a
financial standpoint, analysts said, they could cut costs and
increase their market clout if they combined.
"Companies that are lagging will look to come together and
make one plus one equal three," said Edmund Debler, an
industry analyst at the research firm Mehta Partners LLC. "If
you can take a clean-slate approach . . . you could make
something very exciting."
SmithKline Beecham, based in England, markets brand names
such as Paxil for depression, Tagamet for heartburn and ulcers,
Nicoderm and Nicorette to help smokers quit, and other
drugstore items as diverse as Contac, Tums, Geritol, Phillips'
Milk of Magnesia, Sucrets, Binaca, Vivarin and Aquafresh.
SmithKline has invested heavily in research by a Rockville firm,
Human Genome Sciences Inc.
SmithKline had worldwide sales of $12.4 billion in 1996.
American Home Products, based in Madison, N.J., is the
company behind Premarin, Advil, Robitussin, Dimetapp, and
Centrum vitamins. It remains under a cloud of potential liability
from dexfenfluramine, sold as Redux, and fenfluramine, sold as
Pondimin, two diet drugs linked to medical problems in some
patients. Both were withdrawn from the market last year. AHP
posted revenue of $14.1 billion in 1996.
The two companies declined to discuss the negotiations in
detail, adding in brief statements released yesterday that
nothing may come of their talks.
Investors reacted with enthusiasm, boosting SmithKline's share
price by $2.56 1/4, to $59.56 1/4, and American Home's by
$13.56 1/4, to $94.25.
In the $93 billion U.S. market for prescription drugs, American
Home Products had sales of $5.4 billion and SmithKline had
sales of $4 billion during the 12-month period that ended Nov.
30, according to IMS America Ltd., a health care information
company. Combined, they would overtake Bristol-Myers
Squibb Co., which had the largest U.S. market share with sales
of $5.7 billion, according to IMS.
In terms of worldwide prescription drug sales, the combined
business would rank first or a close second to Novartis
Pharmaceuticals Corp., analyst Hemant K. Shah said.
The clearest advantage of merging is that the companies could
slash their overhead, eliminating jobs and closing redundant
facilities, analysts said. In addition, access to expanded
distribution channels around the world could help them recoup
the huge investments required to develop new drugs.
But fundamental changes in the health care industry in recent
years have given drug companies added incentive to
consolidate. One major impetus is the consolidation of buying
power among big purchasers of pharmaceuticals, such as
managed-care health plans and mail-order pharmacies.
Managed-care companies are "looking for a smaller number of
bigger companies to provide their prescription drug needs,"
said Steven B. Gerber, an analyst with the investment firm
CIBC Oppenheimer & Co.
The same holds for over-the-counter products, as suppliers vie
for precious shelf space in drugstore aisles.
"You want to be the mega producer of over-the-counter
products," said Peter Seaver, the former head of
pharmaceutical marketing for Upjohn Co. and now president
of Kaleidoscope Television, a cable network devoted to health
care.
Staff researcher Richard Drezen contributed to this report.
DRUG MERGER TALKS
SmithKline Beecham and its rival drug maker American Home
Products are considering a merger that would create the
world's biggest over-the-counter drug company.
SMITHKLINE BEECHAM
Business: Pharmaceuticals: researches and makes prescrip-tion
and over-the-counter drugs; world's biggest maker of vaccines;
also consumer health care, health care services
Products: Contac, Geritol, Tums, Tagamet
Headquarters: London (U.S. headquarters in Philadelphia)
Established: 1830 as a small Philadelphia apothecary
Employees: 53,000 worldwide
1996 revenue: $12.30 billion
1996 earnings: $1.74 billion
Ticker symbol: SBH (NYSE)
Web address: sb.com
AMERICAN HOME PRODUCTS
Business: Developer, manufacturer and marketer of
prescription and over-the-counter drugs; also agricultural
products, animal health care and medical devices; includes
food and household-products divisions
Products: Advil, Anacin, Centrum, Chap Stick
Based: Madison, N.J.
Established: 1926
Employees: 67,710
1996 revenue: $14.09 billion
1996 earnings: $1.88 billion
Ticker symbol: AHP (NYSE)
Web address: ahp.com
SOURCES: Company reports, Bloomberg News |
