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.
