Here on dow jones no merger....??
Nevertheless, the bid rumors have persisted, and this week there's been talk
in London of a possible tie-up with U.S. drugs giant Merck & Co. (MRK).
SmithKline wouldn't comment specifically on the Merck rumor, but a
spokesman said Thursday that "it is highly unlikely that the company will be
involved in a merger."
"A merger with Merck is extremely unlikely", said the analyst at the
European investment bank.
He reckons the speculation has been fueled by Merck's exit of two joint
ventures, which left it with a lot of cash: the $2.6 billion sale of its 50% stake
in DuPont Merck Pharmaceutical Co to DuPont Co. (DD) and the exit of
the Astra Merck Inc. joint venture with Sweden's Astra AB (A) that's
guaranteed to bring Merck billions more.
But the unnamed analyst still doesn't think SmithKline's the one for Merck.
That doesn't mean there isn't something still afoot at SmithKline, though.
Some company watchers are looking for an alliance rather than outright
merger.
"(SmithKline) has been in play twice that the market knows of, with AHP
then with Glaxo, so clearly it is looking for some kind of strategic alliance,"
said Martin Evans, head of research at brokerage Sutherlands Ltd.
"As health care costs rise, one way to maintain earnings growth at
historically high levels is to be highly aggressive in looking to cut costs,"
Evans added. "The best way to do that is through a merger, where
companies can pool their (research and development.)"
Even if the U.K. company doesn't pool its R&D with another's, it should still
be able to get new drugs and treatments to market.
"The product pipeline is clearly attractive," Sutherland's Evans said.
The company recently described its pipeline as "deep, diversified and
innovative."
Sales of some new products, such as Parkinson's Disease treatment ReQuip
and heart drug Coreg, have been more sluggish than anticipated.
But diabetes treatment Avandia - currently in late stage, or Phase III, trials -
is expected to offset these hiccups. Analysts reckon the drug stands a good
chance of getting to market and generating peak sales of over GBP2 billion.
-By Michael Reid; 44-171-832-8163; mreid@ap.org
-By Lucy Farndon; 44-171-832-9643; lfarndon@ap.org
Briefing Book for: A | AHP | DD | GLX | MRK | SBH | AAB | S.AST | U.GLX |
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