PNU is on everyone's list of merger candidates. Reuters came out with another story just before after 11:00 AM:
Britain's Zeneca -- lonely near the top?
By Jonathan Birt
LONDON, Feb 2 (Reuters) - Within five years of its demerger
from ICI ICI.L, Zeneca Group Plc ZEN.L Group Plc is on the
brink of becoming Britain's second largest drugs company, with a
market value three and half times that of its former parent.
But suddenly number two looks an uncomfortable place to be,
even with a capitalisation of more than 23 billion pounds ($37.8
billion) to protect you, if the number one spot is to be held by
a monolith of Glaxo Wellcome GLXO.L/SmithKline Beecham Plc
SB.L proportions.
Based on 1996 figures, Zeneca's prescription drug sales of
$3.8 billion are dwarfed by Glaxo/SmithKline's $20 billion
tally, while a global market share of around 1.5 percent pales
beside one of more than seven percent.
Some analysts believe companies of Zeneca's size are
vulnerable in the high budget areas of marketing and especially
in drug research and development.
The group's 1996 drug spend of less than $700 million
compared with a combined $2.8 billion for Glaxo/ SmithKline, and
Zeneca has only partially allayed fears that it faces a gap
between expiring products and new drugs early next century.
"With a Glaxo/SmithKline merger, Zeneca is vulnerable in a
lot of its primary markets," UBS analyst Jerry Brimeyer said.
"They need to do something pretty fast to deal with the gap
in the pipeline...to acquire new products, and they need to look
at their position in the world ranking," Greig Middleton analyst
Tim Franklin added.
But the group's widely admired and phlegmatic chief
executive Sir David Barnes, whose contract runs until 1999, has
always resisted a merger, turning away a host of supplicants,
including both Upjohn and Pharmacia PNU.N before their linkup.
Barnes argues that leadership in therapeutic categories is
more important than overall market share.
One analyst, who asked not to be identified, said Barnes'
stance was justified.
"If you can keep on growing earnings at 15 percent every
year then you shouldn't have to go and jump into bed with
somebody else. They have got two very strong niches in
cardiovascular and cancer, and they have critical mass in
agrochemicals," he said.
But others believe Zeneca will opt to find a partner, either
this year under Barnes' leadership or soon after his departure.
The inexorable rise of the group's share price, which has
climbed by 186 percent over the past three years, partly
reflects the markets view of it as a takeover -- and now more
realistically, a merger -- candidate.
Rumours of interest from Switzerland's Roche Holding AG
ROCZg.S, itself increasingly left behind by the formation of
domestic rival Novartis AG NOVZ.S and now Glaxo/SmithKline,
have eased but never really gone away.
Sweden's Astra AB ASTRa.ST is also mooted as a strong fit.
Astra Zeneca, as well as being a graphic designer's gift, would
bring together two groups of similar size, broadening the
therapeutic range and offering mutual benefits in areas like
asthma, cardiovascular drugs and pain control.
Both also have strong UK research bases -- Zeneca in
north-west England and Astra at the former Fisons site in
central England.
"Astra and Zeneca would make great bedfellows if they ever
got around to it," said Dresdner Kleinwort Benson analyst Peter
McDougall, who believes the UK group will not be independent by
the end of the year.
A Zeneca/Astra merger however would face the problem of
Astra's U.S. joint venture with Merck and Co Inc MRK.N & Co,
which many analysts regard as disadvantageous to the Swedish
group.
It would also leave both companies without critical sales
mass in the crucial U.S. market, whose strong growth has
underpinned the sector while budgetary restraint has hit
European spending.
In the U.S., there has been speculation that SmithKline's
abandoned partner American Home Products Corp AHP.N would make
a good fit with Zeneca.
UBS' Brimeyer said an AHP/Zeneca deal would pcfhub04 produce "a
complimentary product mix. Zeneca, with its cancer and migraine
drugs, and American Home, with its franchise in women's health
and arthritis drugs, would be very well positioned among general
practitioners and specialists."
($ = 0.608 British Pounds)
REUTERS
Rtr 11:04 02-03-98 |
