Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Biotech / Medical : Ligand (LGND) Breakout! -- Ignore unavailable to you. Want to Upgrade?

To: RXGOLF who wrote (13543)	1/20/1998 11:09:00 PM
From: Henry Niman	Respond to of 32384

Here's what the Financial Times is saying tommorrow: Drugs: SmithKline and AHP in $125bn merger talks WEDNESDAY JANUARY 21 1998 By Daniel Green and William Lewis in New York SmithKline Beecham of the UK and American Home Products yesterday confirmed they were considering a merger to create the world's largest pharmaceuticals company. The deal would create a business with annual sales above $26bn, more than 110,000 employees and a combined market value of about $125bn. The announcement sent a wave of speculation through drug company stocks, pushing up prices of shares in Glaxo Wellcome, Zeneca and Nycomed Amersham in the UK and Merck, Lilly and Warner-Lambert in the US. SmithKline shares were up 7 per cent at one point, but fell sharply to end down 3p at 740p as AHP rose 13 per cent or $10 9/16 to $91¬ when Wall Street opened. The higher AHP's shares, the smaller the slice of any merged company that would go to SmithKline shareholders. Shares in both companies have risen strongly in recent days since news of the talks was published in the Financial Times. Both said yesterday they would make no further comment until talks were complete. "There can be no assurances that any such transaction will be agreed or as to what the terms of such a transaction would be," added SmithKline. Talks are set to take weeks rather than days as negotiating teams grapple with a issues ranging from who would run the new company to the potential costs of legal action against AHP for side-effects apparently caused to people who took Redux, its now-withdrawn slimming drug. The talks may have been partly prompted by the uncertain future leadership of AHP, whose chief executive, Jack Stafford, has been ill. A merger would enable SmithKline's younger management team to take over, said Mariola Haggar, pharmaceuticals analyst at Deutsche Morgan Grenfell in New York. The companies would be able to achieve "significant" cost savings - perhaps over $1bn a year - by combining manufacturing and pruning research and development spending, she said. Steven Gerber, analyst at CIBC Oppenheimer, said combining the two companies would result in a "good philosophical alignment". He said investors believe both companies keep a tight control on costs and have experience in successfully concluding large acquisitions. But a full merger would run against recent trends in the sector. It would be the first large deal since the 1996 creation of Novartis from the merger of Swiss rivals Ciba and Sandoz, and the US-Swedish merger of Pharmacia and Upjohn. The P&U deal was followed by a series of profit warnings and helped push mergers off the industry agenda, especially when set against the strong growth most companies achieved in 1997. AHP missed out on much of that growth because it was forced to withdraw Redux, which had been one of the most successful drugs in pharmaceuticals history. SmithKline had prescription drug sales of $8.15bn in 1996 while AHP reported $7.92bn, but sales are much higher when over-the-counter medicines and animal health products are taken into account. AHP's adviser is Morgan Stanley Dean Witter.

To: RXGOLF who wrote (13543)	1/20/1998 11:14:00 PM
From: Henry Niman	Respond to of 32384

Here's what FT is saying about SBH: SmithKline Beecham: Research riches WEDNESDAY JANUARY 21 1998 It's the research, stupid. SmithKline Beecham and American Home Products do not need to merge. Both are growing at around 13-14 per cent a year and SmithKline, in particular, has a promising product pipeline. But the opportunity of creating a giant with the resources to throw $2.5bn-$3bn annually at R&D seems too good to miss. Particularly, since technology advances are about to deluge the pharmaceutical industry with new drug candidates. A merger would bring other benefits too. It would transform two companies being squeezed out of the top 10 into the world's number one. SmithKline's dynamic management would neatly fill the vacuum at AHP, and since both companies are effectively American there should be fewer cultural problems than at Pharmacia & Upjohn. Cost savings may not be the prime focus, but synergies should still be substantial. A 15 per cent cut in the smaller company's cost base - AHP's - would yield $1.7bn. Taxed and on a multiple of 10 times earnings that amounts to $12bn, almost the increase in the groups' market value since the deal was mooted. Both were quick off the mark during the drug industry's last consolidation wave in 1994. And the prospect of a $130bn behemoth cornering a big chunk of an essentially finite pool of R&D leads should give rivals pause for thought. SmithKline's chief executive, Jan Leschly, has been adamant that bigger does not mean better. But he would surely like the chance to prove himself wrong.

To: RXGOLF who wrote (13543)	1/20/1998 11:18:00 PM
From: Henry Niman	Respond to of 32384

Here's what FT said a couple of weeks ago about drug discovery: Drugs: Embarrassment of riches Originally published: SATURDAY JANUARY 3 1998 Over the past 100 years, scientists have discovered around 450 different "types" of drugs, such as beta blockers and cholesterol-lowering agents. The next 10 years could yield an astonishing 4,000-5,000 more, as researchers exploit new techniques from gene sequencing to robotic screening. How will the pharmaceutical industry deal with such an embarrassment of riches? Such vast opportunities present a tricky challenge. On the one hand it will be in every company's interest to try to snaffle up as many as possible of the large, but essentially finite, number of new research leads. On the other, this proliferation of activity threatens to overwhelm even the biggest R&D departments. Already, executives at some big companies are complaining that they have too many plausible drug candidates to take forward into full development. Those companies that do succeed in developing lots of new products will still have to pay for their launch. With the cost of bringing a new medicine to market estimated at around $600m by Lehman Brothers, even huge companies such as Glaxo Wellcome and Merck will not be able to finance more than three or four a year. One solution is to step up collab-orations. While most established pharmaceuticals groups have multiple links with biotechnology companies, they have been more reluctant to co-operate with each other. SmithKline Beecham has set an example by bringing in four other drug companies to help it develop leads emanating from its link-up with the US biotech company Human Genome Sciences. In return for sharing this information, SmithKline will get royalties or co-marketing rights on any resulting drugs. Along similar lines, a company that has discovered drug candidates outside its area of expertise, for instance in cancer, could sell them to a rival for which cancer is a core therapeutic franchise. Clever financing could also help. If a company could not handle all its research opportunities it could bundle them into a separate development company and sell or float a chunk of it to bring in external funding. Outside investors might be suspicious that they were being sold the least promising projects. But this could be overcome through a lower valuation for the new company or by tying together products from the same therapeutic area. Most importantly, the pressure to develop more products at greater speed will put renewed pressure on drug companies to consolidate. The possibility of two large companies, say Glaxo and Pfizer, getting together to corner more than their fair share of new product leads is not inconceivable - and the repercussions would reverberate through their peer group. On top of that, the industry is coming up to a new wave of patent expiries, which will leave some groups looking vulnerable. In 1995, the top 28 drug companies had 6 per cent of their pharmaceuticals sales coming off patent in the following three years. In 2000, it will be more than 20 per cent. Good volume growth and high share prices have allowed managements to ignore the urge to merge over the past two years. But consolidation is coming back on to the agenda.

To: RXGOLF who wrote (13543)	1/20/1998 11:22:00 PM
From: Henry Niman	Respond to of 32384

Here's a recent Pharma review in FT: Pharmaceuticals: Another golden year in prospect TUESDAY JANUARY 13 1998 By Clive Cookson The pharmaceutical industry is looking forward to another golden year in 1998. Most companies expect strong overall growth in sales and profits, fuelled by double-digit expansion in the US market. At the same time, there is increasing excitement about a new wave of innovative drugs in the research pipeline as scientists apply new genetic and chemical techniques to pharmaceutical discovery and development. There may be some setbacks as governments in Europe and Asia attempt to strengthen drug price control mechanisms but on the whole, as Richard Markham, American chief executive of Germany's Hoechst Marion Roussel (HMR), puts it: "It's going to be a fantastic year for the industry." Analysts expect the global market to keep growing at about its current rate of 7 per cent during 1998. As Mr Markham notes, it is just five years since one respected team of investment analysts put out a fat report entitled The Pharmaceutical Industry of the Future - A Black Hole. In the early 1990s, many people forecast that a combination of healthcare reform programmes and ferocious price competition between similar drugs would drive down profits throughout the industry, to a point at which many companies would be forced to make big cuts in research and development - the lifeblood of their future. In response to such fears, shares in pharmaceutical companies were then trading at a price/earnings discount to the market. As it turned out, the Clinton administration and Democrats in Congress failed to impose a damaging reform programme in the US, European governments took a more relaxed attitude to pharmaceutical pricing than the pessimists had expected, and several companies managed to cut costs substantially through mergers and acquisitions. The outcome has been a sequence of four consecutive years in which the pharmaceutical sector has outperformed the market. It is now back to its traditional P/E premium. "As a sector, the pharma industry has delivered in spades," says Mark Becker, London-based pharmaceutical analyst for J.P. Morgan Securities. On average, companies have shown earnings growth of 13 per cent over the past five years and are forecasting growth of 13 per cent over the next five. One reason for the improved outlook, Mr Markham says, is that companies are winning the battle to convince governments that drugs, far from being a drain on healthcare resources, help to save money. The industry's growing band of pharmaco-economists is producing increasingly sophisticated analyses to show that innovative drugs lead to savings far greater than their own costs, for example by reducing substantially the time that patients need to spend in hospital. "It is becoming increasingly clear that the pharmaceutical industry will be the saviour in the fight to cut healthcare costs," Mr Markham says. The other reason for optimism is the way companies are increasing the productivity of their R&D operations (which typically consume about 15 per cent of total expenditure) by improved management and new technology. Large companies such as HMR, which have managed to launch drugs at an average rate of about one a year, are now promising two or three important new products a year. Glaxo Wellcome put 18 new chemical entities into the first "exploratory" stage of development in 1997, says James Niedel, R&D director, compared with just six by Glaxo and Wellcome before their merger in 1994. "I'm very excited about the R&D revolution," says Kevin Wilson, European pharmaceutical analyst at Salomon Smith Barney. "I think it will be very bullish for some parts of the industry." One buzzword in the industry, which Mr Wilson predicts will become increasingly familiar to investors during 1998, is bioinformatics: the use of information technology to make sense of the vast volumes of genetic and biological data pouring out of research laboratories. Companies vary greatly in the extent to which they have invested in bioinformatics; SmithKline Beecham has perhaps the highest profile in this field. Another likely buzzword for the future is pharmacogenomics: using genetic analysis of patients to prescribe the drugs most beneficial for their disease. Although the pressure on pharmaceutical companies to merge has relaxed as their financial outlook has grown brighter, the industry is expecting further activity in mergers and acquisitions over the next two or three years. Consolidation may no longer be a matter of life or death, but companies are still attracted by the large cost savings available from a well managed merger. Some names feature in takeover speculation more frequently than others. Global companies that are in the second tier by size, such as the UK's Zeneca, are often seen as targets. Any of the giants seeking to increase market share is a potential predator, though Switzerland's Roche may be particularly hungry now that Ciba and Sandoz have combined into Novartis. Predicting takeovers is as much a matter of guesses and rumours in the pharmaceutical industry as in any other. But, with the largest companies holding less than a 6 per cent market share, the biggest surprise would be if there was no corporate consolidation this year.

To: RXGOLF who wrote (13543)	1/20/1998 11:33:00 PM
From: Hippieslayer	Read Replies (1) \| Respond to of 32384

RXGOLF, or is Dr. Sycophant more apropos, you just hooked one out of bounds cuz I was talking for myself and not for others. BTW, how does the tally of how many people visiting Henry's site give any value on investing in LGND? Henry can use the clubhouse to post this type of info. As they say in your biz, RXGOLF, I'm going to get a second opinion. "A quick moment of silence"??? You have got to be kidding me? This isn't a cult. OOPS, I'm sorry. I think, for some, this thread is almost a cult. I'm starting to think that the wine you guys are talking about might be something else that just looks like wine. And I really hope you don't plan on committing mass suicide once LGND hits the $20 mark. The second coming of Christ has come, my son. And his followers can be found right here on the lakes of Loony Ligand. Remember RxGOLF- if you disagree with what I say, just hit the NEXT button. And since I have been using the NEXT button often, as there has been very little of interest here lately, I actually think I'm starting to get a case of carpal tunnel syndrome. Adios, Senor.

To: RXGOLF who wrote (13543)	1/21/1998 12:18:00 AM
From: Henry Niman	Read Replies (1) \| Respond to of 32384

Here's the latest from WSJ: January 21, 1998 SmithKline and American Home Have Held Talks About Merger Many Obstacles Stand in Way Of Creation of Top Drug Maker By ELYSE TANOUYE and STEVEN LIPIN Staff Reporters of THE WALL STREET JOURNAL SmithKline Beecham PLC disclosed it has held merger talks with American Home Products Corp., an effort aimed at creating the world's largest drug company in what would be the biggest corporate combination in history. Discussions began in early November but cooled a few weeks later because of disagreements over price and other issues, according to people familiar with the matter. The talks aren't dead, but it is unclear how active any current discussions might be. The possibility of a deal sent both companies' shares soaring Tuesday, giving American Home a market value of $61 billion and SmithKline a value of $65 billion. Numerous obstacles besides price stand in the way, including huge legal liabilities involving American Home's diet-drug recall and its Norplant contraceptive. But observers argue that the disclosure of the on-and-off talks, required by British regulations, could revive the courtship or attract new bidders. Both sides had reached a broad outline on a management structure that would have seen American Home's chairman and chief executive officer, John R. Stafford, start out as the top executive of the combined company, eventually handing the reins to SmithKline's chief, Jan Leschly. Mr. Stafford, 60 years old, has dominated American Home for the past decade, and last May he lost his only possible inside successor to another company. In late November, after talks with SmithKline had cooled, Mr. Stafford underwent surgery for prostate cancer, which the company said was successful. American Home Shares Jump 17% American Home, of Madison, N.J., said future discussions with London-based SmithKline may be held, but both companies warned that a deal might not be carried out. American Home shares surged $13.5625, or 17%, to close at $94.25 in New York Stock Exchange composite trading, while SmithKline's American depositary shares rose $2.5625, or 4.5%, to $59.5625. A merger would combine two pharmaceutical companies that have long aspired to premier status but have been eclipsed in recent years by a string of mergers that produced far larger, richer competitors. SmithKline, the ninth-largest drug company in drug sales, and No. 7-ranked American Home were bumped out of the top tier by deals that built Glaxo Wellcome PLC, Novartis AG, Hoechst AG and still other behemoths. Now, the two companies seek to attain the huge scale needed to compete with the giants, cut billions of dollars in overlapping costs and generate the revenue needed to fund the skyrocketing costs of research and development. Together, they would be a good fit, analysts noted. Both companies have strong vaccine businesses -- American Home bought into that market a few years ago by mounting a hostile acquisition of American Cyanamid Corp. after learning it was close to a deal with SmithKline. Their vaccine businesses together may be so strong as to invite scrutiny by the Federal Trade Commission, should a deal be reached. SmithKline also makes the hot-selling antidepressant Paxil, while American Home makes the smaller brand Effexor in that category. SmithKline also produces anti-infectives Augmentin, Famvir and Bactroban, while American Home makes less-well-known antibiotics. American Home is strong in women's products, including Lo/Ovral contraceptives and the popular menopause drug Premarin. SmithKline's consumer business boasts well-known brands such as Aquafresh toothpaste, Nicorette gum and Nicoderm CQ patches in the smoking-ending segment, and heartburn remedies Tums and Tagamet HB. American Home's brands are even bigger, with Advil pain reliever, Robitussin cough syrup, vitamin supplement Centrum and Chap Stick lip balm. Concerns About Future Despite its brand portfolio, SmithKline's Mr. Leschly is said to have become disappointed with the company's prospects. Its research pipeline, an investment in genetic technology and acquisition of a pharmacy-benefit-management company have failed to move SmithKline into the top ranks of drug makers. Combining with American Home would give SmithKline the scale and broader product portfolio to compete more effectively, some analysts said. And a combination would increase the resources available to push promising new-product candidates through the research-and-development pipeline. American Home has 60 promising products in research stages but needs extra muscle to turn those into successful drug introductions; developing just one successful launch typically costs more than $300 million. Rumors about the talks began circulating last week in London, causing SmithKline's stock price to rise 7% on Friday. Both companies have proved to be experts at merging with other companies in the past, and "they've done a very good job," said Jack Lamberton, an independent analyst. Still, some observers say the chances of a deal emerging are slim. American Home's recall of the Redux and Pondimin diet drugs in September because of reports linking the drugs to heart-valve damage could pose a liability of $3 billion to $4 billion, well in excess of insurance coverage estimated at as much as $1 billion. The company also faces more than 300 lawsuits filed on behalf of tens of thousands of women who claim injury from Norplant, the contraceptive that is implanted into the upper arm. The liability issue was apparently a sticking point in negotiations over price in the merger talks with SmithKline. People familiar with the situation say one stumbling block was the question of the "exchange ratio" of a stock combination -- in effect, how large a stake in the combined company would go to SmithKline shareholders vs. American Home holders. Huge Savings Are Seen American Home is expected to report 1997 earnings of $2.2 billion on revenue of $14.2 billion, according to Value Line, while SmithKline is expected to post profit of $1.5 billion on revenue of $13.2 billion. The combined SmithKline/American Home Products could reap huge annual savings-as much as $2 billion in cost savings over time, which could help increase the profit of the combined entity by 20% to 25%, according to Jami Rubin, an analyst at Schroder & Co. Such savings would fuel near-term profit growth, according to some estimates. The combined entity would create a $3 billion research-and-development budget, far higher than the spending by rivals. "This company would be a world-beater," said Mark Becker, a London-based drug analyst with J.P. Morgan. "You'd be fitting together the strengths of each in a way that would make many of their present weaknesses disappear." Birth of a Behemoth? SmithKline Beecham American Home Products 1997 revenue-a $13.2 billion $14.2 billion 1997 net income-a $1.5 billion $2.2 billion No. of employees 57,000 59,600 Total shares outstanding $1.1 billion-b 648 million Stock's 52-week high $59.5625 $94.25 Stock's 52-week low $33.56 $57.00 Major prescription drugs Paxil (anti-depressant), vaccines Premarin (for menopause symptoms) Major consumer products Tums, Tagamet HB, Aquafresh, Nicorette gum, Nicoderm CQ Effexor (anti-depressant) Advil, Robitussin, Chap Stick a-Estimate b-Based on ADRs traded on the NYSE Sources: Value Line, Baseline, the companies