Karun, Next week's Barron's suggests that the GLX/SBH merger may not be made in heaven. Alan Abelson's column indicates:
"News that Glaxo and SmithKline would like to tie the knot and create a tiny company with a market value of only $160 billion sent shares of both heavenward and set off a sympathetic explosion in the drug sector generally. It also set off a thunderclap of approval in Wall Street, duly accompanied by oohs and ahs in the press.
We Wonder
It strikes us that, in some ways, this is not a merger of two strong companies that together will prove an extraordinary dominating force in the global drug business. Right off the bat we were struck by the incongruity of the bullish claim that (a) there's scant overlap between the companies buy, yet, (b) a merger will yield vast savings.
Glaxo, from what we gather, faces some formidable challenges. Not the least of these is in AIDS drugs, a field in which it has long been No. 1. Thus, for example, in December, for the first time, more prescriptions were written for Bristol-Myers 4dT for use in HIV therapy than for Glaxo's flagship AIDS drug, AZT.
Nor should we stress, is this the only competitive cloud over Glaxo's AIDS offerings. New formulations continue to come down the pike in considerable numbers. Among them is DuPont Merck's extremely promising new drug, now in development; when it hits the market, a year or so from now, it may well cause considerable dislocations in the field, with Glaxo's entries possible prime candidates.
In like vein, SmithKline's Augmentin antibiotic, one of its two prime products, is now faced with fresh and serious competition from a Pfizer drug. And in any case, Augmentin is slated to come off patent in around three years.
On the face of it, not a marriage made in heaven." |
