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Warner Lambert to Acquire Agouron Pharmaceuticals for $2.1 Billion
Analyst: Glenn Curtis (1/26/99)
Warner Lambert (NYSE: WLA) said it agreed to buy drug maker Agouron Pharmaceuticals (AGPH: AGPH) for $2.1 billion in stock.
Based upon the market prices of both issues, Agouron will bought out at a price of $60.00 per share, a 5.6% premium to its $56.81 share price prior to the announcement. Upon the news release, trading in Agouron was halted.
Agouron is well known for its lead product, Viracept, a protease inhibitor for the treatment of the AIDS virus. The date on which the deal is expected to close, and the impact that this acquisition will have on Warner Lambert's earnings has not yet been publicly discussed.
In addition to Viracept, Warner Lambert will also be acquiring Agouron's Remune, a therapeutic agent in pivotal Phase II/III trials for the treatment of HIV. Agouron has about $62 million in cash and short-term securities, and just $7.2 million in long-term debt as of September 30, 1998.
To date Agouron is on track to do roughly $576 million in annualized sales. Estimates had Agouron earning $1.20 per share for the year ending June 1999, and $1.77 per share for FY 2000 on roughly 33 million shares. This dollar figure is roughly equivalent to 5% of Warner Lambert's expected revenue of $11.9 billion.
Credit Suisse First Boston analyst Shekhar Basu said 'Agouron should be immediately accretive to Warner Lambert's earnings. Most importantly though, this acquisition allows Warner Lambert an entree' into the HIV market, which can be an important ingredient in Warner Lambert's drug portfolio'.
Bottom Line:
This acquisition will be an important move in expanding Warner Lambert's pipeline into the lucrative market for the treatment for HIV. If the deal is called off, Warner Lambert has the option of buying up to 19.9% of Agouron and be required to pay a $60 million fee.
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