Ibexx, Mark & thread, the following Bloomberg update has some additional comments from analysts. I get the feeling that the Street likes the deal. At least Goldman Sachs and PaineWebber won't say anything negative!
Warner-Lambert to Buy Agouron for US$2.1 Bln, Getting Its First AIDS Drug
Bloomberg News
January 26, 1999, 7:02 p.m. ET
Warner-Lambert to Buy Agouron for $2.1 Billion (Update3)
(Adds Lipitor sales in 5th paragraph, analyst comment in 8th
paragraph and background in 9th paragraph.)
La Jolla, California, Jan. 26 (Bloomberg) -- Warner-Lambert
Co., one of the world's most profitable drugmakers, will buy
Agouron Pharmaceuticals Inc., a biotech company that makes the
No. 1 protease inhibitor for AIDS, for $2.1 billion in stock.
Warner-Lambert said it will pay between 0.8108 and 0.93
share of its stock for each Agouron share. That makes the
transaction worth about $60 a share, a 5.9 percent premium to
Agouron's last price.
The move will give Warner-Lambert its first AIDS drug,
Agouron's Viracept, three other AIDS drugs in human testing and
experimental medicines for cancer and the common cold. Warner-
Lambert needs new drugs because safety concerns and new
competition for its diabetes pill Rezulin have left it more
dependent on its cholesterol drug Lipitor.
''Warner-Lambert needed help to shore up its pipeline,''
said Michael Sheffery, an analyst with OrbiMed Advisors, which
holds shares in both companies. ''Now it's all Lipitor. They have
to have something more than that.''
Trading in Agouron shares was halted before the news was
released. Earlier the La Jolla, California-based biotechnology
company rose 3 21/32 to 56 13/16. Warner-Lambert rose 1 5/8 to
69 1/2. The acquisition was announced just before the close of
U.S. stock markets.
Lipitor and Rezulin helped turn Warner-Lambert -- one of the
least successful U.S. pharmaceutical companies a few ago -- into
one of the world's most profitable drugmakers. Regulators had
shut much of Warner-Lambert's drug production in the early 1990s
for failure to meet manufacturing standards.
In 1997, Warner-Lambert put Rezulin and Lipitor on the
market. Lipitor sales in 1998 totaled $2.2 billion, more than the
cost of the purchase price for Agouron. Rezulin sales totaled
$748 million, even with strict warnings about the drug on the
label about potential side effects.
Competition for Rezulin
Rezulin sales could slow as similar and, possibly safer,
drugs come on the market. SmithKline Beecham Plc. and Eli Lilly &
Co., in a joint venture with Japan's Takeda Chemical Industries
Ltd., could introduce similar diabetes pills in the U.S. within a
year. Early testing indicates SmithKline's drug may have fewer
side effects than Warner-Lambert's Rezulin.
Warner-Lambert is buying Agouron as it and other drugmakers
hunt for new blockbuster drugs to maintain profit growth of more
than 10 percent a year. Investors have come to expect this
performance from drugmakers such as Warner-Lambert, which
yesterday reported that fourth-quarter profit rose 45 percent to
$341.1 million.
''These companies are awash with cash. They need new
products to drive their double-digit earnings-per-share growth
and often times, the acquisition of a small company is the
easiest way to do it,'' said Charles Engelberg, an analyst with
AmeriCal Securities.
Abbott Laboratories is considered likely to make an
acquisition this year to boost its drug pipeline, analysts have
said. Other drugmakers such as Merck & Co. will look to enter
agreements with biotechnology companies about experimental drugs,
which have fared well in early testing in humans.
Agouron is one of the few biotechnology companies that
already has an approved product on the market. Its Viracept last
year became the best-selling protease inhibitor, a powerful type
of AIDS drug that's become the cornerstone of combination
therapy. Viracept sales totaled $133.9 million in Agouron's
fiscal first quarter.
PaineWebber Inc. advised Agouron. Goldman, Sachs & Co.
advised Warner-Lambert.
--Jim Finkle in the San Francisco newsroom (415) 912-2996 with |
