MEDIA WATCH: Pharmaceutical merger receives clean bill of health

The pharmaceutical industry has caught the merger bug yet again with the announcement that American Home Products and Warner-Lambert are set to join together - despite an unsuccessful bid from Pfizer. The dollars 72 billion mega-merger is said to be the biggest deal to date in the drug industry and one of the biggest mergers of any kind, ever.

The pharmaceutical industry has caught the merger bug yet again with the announcement that American Home Products and Warner-Lambert are set to join together - despite an unsuccessful bid from Pfizer. The dollars 72 billion mega-merger is said to be the biggest deal to date in the drug industry and one of the biggest mergers of any kind, ever.

The pharmaceutical industry has caught the merger bug yet again

with the announcement that American Home Products and Warner-Lambert are

set to join together - despite an unsuccessful bid from Pfizer. The

dollars 72 billion mega-merger is said to be the biggest deal to date in

the drug industry and one of the biggest mergers of any kind, ever.



The news that the new company, AmericanWarner, will be the world’s

largest prescription drugmaker was reported enthusiastically by much of

the media, with Wall Street investors and industry analysts citing

benefits for each company. CARMA’s examination of the media coverage

surrounding the announcement looked at why the merger was reported so

favorably and why further industry consolidation can be expected.



’The merger, if it goes through, goes a long way to solving the problems

of both companies,’ concluded Mara Goldstein, analyst with CIBC World

Markets. Standard & Poor analyst Herman Saftlas added that the merger

’makes a lot of sense’ and that the new company would be ’a major

powerhouse in terms of sales’ (The Washington Post, November 4).



Much of the coverage paid attention to the wide array of products that

would be offered by the newly formed company, which would include not

only prescription drugs, but also consumer brands and agricultural

products.



Alleviating any fears of possible antitrust issues, Viren Mehta of Mehta

Partners said, ’The only noticeable problem is the sizable gap that

would exist between the world’s top drugmaker and its nearest

competitor’(The New York Times, November 4).



One element of the deal that caught the media’s eye was the expected

stock growth to be generated. As BT Alex Brown analyst Barbara Ryan

explained, ’You’re going to have a company that is going to grow perhaps

20%, and that’s going to be difficult for anyone else in the industry to

achieve without deals’ (CNN, November 4).



However, the announced merger did not entirely escape criticism. Some

reports pointed out that American Home Products had already endured

failed merger attempts with SmithKline Beecham and later with Monsanto.

The company has also recently suffered from a rash of safety and legal

troubles with its drugs. In addition, both companies received criticism

from a recent report by consumer group Families USA, which highlighted

that wholesale prices for 50 drugs commonly prescribed to the elderly

have risen far ahead of inflation, thereby inviting pressure from

consumers and Congress.



Notably, much of the coverage focused on the effect of the merger on the

industry, rather than the consumer. Still, as The Wall Street Journal

reported, the pharmaceutical industry is ripe for further

consolidation.



As the process of discovering and marketing breakthrough medicines is so

expensive, product-hungry companies such as American Home and

Warner-Lambert feel the pressure to solve their short-term revenue needs

by joining forces (November 4).



News of Pfizer’s merger offer for Warner-Lambert - which ultimately

failed - suggests the shake-up in the industry is far from over.





- Evaluation and analysis by CARMA International. Media Watch can be

found at www.carma.com.



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