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Biotech / Medical : Pharmacia & Upjohn (PNU) -- Ignore unavailable to you. Want to Upgrade?

To: Steven Angelil who wrote (24)	2/3/1998 2:04:00 PM
From: Henry Niman	Read Replies (1) \| Respond to of 43

PNU is on everyone's list of merger candidates. Reuters came out with another story just before after 11:00 AM: Britain's Zeneca -- lonely near the top? By Jonathan Birt LONDON, Feb 2 (Reuters) - Within five years of its demerger from ICI ICI.L, Zeneca Group Plc ZEN.L Group Plc is on the brink of becoming Britain's second largest drugs company, with a market value three and half times that of its former parent. But suddenly number two looks an uncomfortable place to be, even with a capitalisation of more than 23 billion pounds ($37.8 billion) to protect you, if the number one spot is to be held by a monolith of Glaxo Wellcome GLXO.L/SmithKline Beecham Plc SB.L proportions. Based on 1996 figures, Zeneca's prescription drug sales of $3.8 billion are dwarfed by Glaxo/SmithKline's $20 billion tally, while a global market share of around 1.5 percent pales beside one of more than seven percent. Some analysts believe companies of Zeneca's size are vulnerable in the high budget areas of marketing and especially in drug research and development. The group's 1996 drug spend of less than $700 million compared with a combined $2.8 billion for Glaxo/ SmithKline, and Zeneca has only partially allayed fears that it faces a gap between expiring products and new drugs early next century. "With a Glaxo/SmithKline merger, Zeneca is vulnerable in a lot of its primary markets," UBS analyst Jerry Brimeyer said. "They need to do something pretty fast to deal with the gap in the pipeline...to acquire new products, and they need to look at their position in the world ranking," Greig Middleton analyst Tim Franklin added. But the group's widely admired and phlegmatic chief executive Sir David Barnes, whose contract runs until 1999, has always resisted a merger, turning away a host of supplicants, including both Upjohn and Pharmacia PNU.N before their linkup. Barnes argues that leadership in therapeutic categories is more important than overall market share. One analyst, who asked not to be identified, said Barnes' stance was justified. "If you can keep on growing earnings at 15 percent every year then you shouldn't have to go and jump into bed with somebody else. They have got two very strong niches in cardiovascular and cancer, and they have critical mass in agrochemicals," he said. But others believe Zeneca will opt to find a partner, either this year under Barnes' leadership or soon after his departure. The inexorable rise of the group's share price, which has climbed by 186 percent over the past three years, partly reflects the markets view of it as a takeover -- and now more realistically, a merger -- candidate. Rumours of interest from Switzerland's Roche Holding AG ROCZg.S, itself increasingly left behind by the formation of domestic rival Novartis AG NOVZ.S and now Glaxo/SmithKline, have eased but never really gone away. Sweden's Astra AB ASTRa.ST is also mooted as a strong fit. Astra Zeneca, as well as being a graphic designer's gift, would bring together two groups of similar size, broadening the therapeutic range and offering mutual benefits in areas like asthma, cardiovascular drugs and pain control. Both also have strong UK research bases -- Zeneca in north-west England and Astra at the former Fisons site in central England. "Astra and Zeneca would make great bedfellows if they ever got around to it," said Dresdner Kleinwort Benson analyst Peter McDougall, who believes the UK group will not be independent by the end of the year. A Zeneca/Astra merger however would face the problem of Astra's U.S. joint venture with Merck and Co Inc MRK.N & Co, which many analysts regard as disadvantageous to the Swedish group. It would also leave both companies without critical sales mass in the crucial U.S. market, whose strong growth has underpinned the sector while budgetary restraint has hit European spending. In the U.S., there has been speculation that SmithKline's abandoned partner American Home Products Corp AHP.N would make a good fit with Zeneca. UBS' Brimeyer said an AHP/Zeneca deal would pcfhub04 produce "a complimentary product mix. Zeneca, with its cancer and migraine drugs, and American Home, with its franchise in women's health and arthritis drugs, would be very well positioned among general practitioners and specialists." ($ = 0.608 British Pounds) REUTERS Rtr 11:04 02-03-98