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Could Ivax Get Swallowed?

Inside Wall Street


Short-sellers on the run. Insider buying heating up. And takeover whispers

getting louder. All that action is fueling a resurgence in the stock of IVAX

(IVX), the nation's largest generic drugmaker, making the shares leap from 24

to 29 in recent weeks. What's going on?

The shorts are still very much on IVAX' back, but they have taken a

beating as the stock has jumped. IVAX has been talked about as a takeover

target all year, but it now is starting to appear much closer to doing an

actual merger deal, says one investment banker.

Analysts estimate the drugmaker's value at 40 a share on fundamentals

alone, based on the company's projected 1996 earnings. (In 1994, the stock's

price climbed as high as 38.) One analyst, whose investment firm has banking

ties with IVAX, figured that the drugmaker's earnings in the fourth quarter

of 1996 could approach $2 a share on an annual basis. So IVAX is a shoe-in to

hit the 40s next year. In the pharmaceutical industry, the average p-e is 22,

vs. IVAX's current p-e of 20.

In spite of the stock's 30% climb this year, some corporate insiders,

including Chairman and CEO Philip Frost, have stepped up their buying. In

August, Frost exercised options for 1.4 million shares, which set him back

more than $1 million. That move boosted his stake to 15%.

Takeover speculation has been driven by a recent purchase by BASF, a large

German drug-and-chemical conglomerate, by which it acquired a 4.9% stake in

IVAX. Some investors argue that the buy was just an initial step toward

building up a major position in IVAX. BASF may be forced to accelerate its

buying because of the advance in the stock's price. In March, IVAX and BASF

formed a joint venture to set up a generic-drug operation in Germany. "That

will eventually expand, we expect, to the rest of Continental Europe," says

analyst David Saks of Gruntal & Co. "BASF may take a larger equity position,

with an eye toward a merger."

BASF may not be the only suitor, however, says one investment banker.

"There are other pharmaceutical companies in Europe and the U.S. who I would

say are suitors," he insists. One such, he adds, is Bayer, another German

giant. "IVAX has positioned itself in the generic and nongeneric drug

business in such a way that it makes a good fit with many European drug

companies," says one IVAX insider. Frost declined comment.BY GENE G. MARCIAL

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