03/10 13:14 FOCUS-Dupont seeks to raise its biotech profile
NEW YORK, March 10 (Reuters) - DuPont Co. <DD.N> took steps on
Wednesday to show off its pharmaceutical businesses, saying it was
seeking alliances and that it will create a tracking stock to allow the hidden
value of the operations to flourish.
The company, is likely to strike a deal with one or more partners by the
end of the year, DuPont Chief Executive Charles Holliday said in a
prepared statement.
"Our goal is to bring our already solid DuPont Pharmaceuticals to critical
mass through strategic alliances," Holliday said in the statement. "Given
the success of our discussions to date, we expect to be able to conclude
one or more of these alliances by the end of this year."
A published report earlier this month said that DuPont and life sciences
heavyweight Monsanto Co. <MTC.N> were in preliminary merger talks.
Both companies declined comment then and Monsanto declined
comment again on Wednesday after DuPont's announcement.
Investors continued to push up DuPont's stock in the wake of the news.
Its shares were up $3.875 at $57 in early afternoon trade on the New York
Stock Exchange.
But some analysts, like John Venusti of HSBC Securities, were wary
about DuPont, saying the company's stock was likely to continue to
perform poorly amid an unwillingness to restructure meaningfully. He cited
cyclical businesses like nylon and polyester and also noted what he called
an "utter lack of success" in the life sciences business.
"We believe the meeting will do little to alleviate the abysmal performance
of DuPont's stock over the last nine months -- i.e., we expect further
disappointments from the meeting," Venusti wrote in a report dated March
10 that HSBC circulated Wednesday on the Internet via e-mail.
It was not immediately clear whether Venusti's comments were written
before DuPont's announcement, but they were, in any case, in stark
contrast to the optimism DuPont expressed in its statement.
DuPont said it will file to launch the "tracking stock" of its life sciences
businesses with the U.S. Securities and Exchange Commission late in
1999 and will seek shareholder approval the following quarter. Tracking
stocks are designed to isolate particular assets within a corporation that
may have a particular value. Pharmaceuticals typically are far more
profitable than chemicals, which for over a century have been the lifeblood
of Wilmington, Del.-based DuPont.
"Our governing objective is to increase shareholder value. Growth toward
critical mass in our life sciences portfolio is an imperative. Today's
announcement is further evidence of our commitment to transform
DuPont into a faster growing, more profitable and less cyclical company,"
Holliday said.
The company noted that the tax consequences of a tracking stock
strategy are currently part of a legislative debate surrounding the Clinton
Administration's fiscal 2000 budget.
DuPont signaled its determination last summer to become a major player
in life sciences, which includes pharmaceuticals and agricultural
products, when it agreed to buy Merck & Co.'s <MRK.N> 50 percent
interest in the two companies' DuPont-Merck joint venture for $2.6 billion.
DuPont and Merck continue to share marketing rights on Sustiva, an AIDS
drug that is the crown jewel of DuPont's pharmaceuticals portfolio.
The life sciences businesses include DuPont Pharmaceuticals, Crop
Protection Products and the recently formed Nutrition & Health business.
Sales in 1998 for DuPont life sciences businesses totaled $4.3 billion,
while all of DuPont had sales of $25.7 billion.
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