European Drug Shares Up On Pfizer Talk, But No Big Deals Seen
January 23 2009 - 5:10AM
Dow Jones News
European pharmaceutical stocks benefited early Friday from news
U.S. giant Pfizer Inc. (PFE) is in takeover talks with smaller
rival Wyeth (WYE), but analysts cautioned that an eventual deal
won't necessarily kick start a new round of M&S in the
sector.
"The credit market situation is improving, but it's of course
not clear if this deal could be financed through bank loans as the
bank's situation is constantly evolving," said Karl-Heinz Koch,
analyst in Zurich, with independent broker Helvea.
The Wall Street Journal reported Friday that Pfizer Inc. is in
talks to acquire Wyeth in a deal that could be valued at more than
$60 billion, citing people familiar with the matter.
A combination of these two U.S. pharmaceutical giants would
redraw the boundaries of the global drug industry, which has
suffered from flagging product development and high fixed costs.
The two sides have been in discussions for months and a deal isn't
imminent. Given recent market volatility and overall economic
uncertainty, the talks are especially fragile and could collapse,
the people warned.
Still, European stocks are benefiting amid hopes that big deals
may again become a possibility.
At 0840 GMT, the Stoxx Europe (600) Health Care Index was up
1.2%.
The notable exception was Dutch vaccine maker Crucell (CRXL)
which saw its share price sink amid worries its friendly takeover
talks with Wyeth might now be stalled.
Pharmaceutical analysts cautioned though that Pfizer's situation
is different to that of many of its rival because it faces a
particularly steep decline in revenue over the next five years when
a number of key drugs will lose patent protection.
"I don't expect the Swiss companies to engage in a similar big
deal," Helvea's Koch said.
Another Zurich-based analyst pointed out that Novartis already
is involved in a potentially huge transaction if it choses to
exercise an option to buy shares of eyecare maker Alcon (ALC) that
it doesn't already owns. Novartis has the exclusive right to
acquire food group Nestle AG's (NESN.VX) remaining 52% Alcon stake
at a price of up to $28 billion.
Roche, for its part, has been in talks to fully acquire
biotechnology Genentech Inc. (DNA) since July. Roche already owns a
majority of Genentech, which so far has rejected an offer to buy
the remaining shares as too low. Investors have also worried
whether Roche will manage to complete the $44 billion deal because
capital markets have deteriorated since the deal was announced.
"Should Pfizer manage to complete the Wyeth deal, and finance it
partly through bank loans, that would certainly send an encouraging
signal for the Roche/Genentech transaction, the Zurich-based
analyst said.
At 0840 GMT, Novartis was up CHF0.50, or 1%, at CHF52.50 and
Roche was CHF0.70, or 0.4%, higher.
Company Web Site: http://www.roche.com
http://www.novartis.com
-By Anita Greil, Dow Jones Newswires; +41 43 443 8044 ;
anita.greil@dowjones.com
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