The Lowdown On Upjohn

Upjohn was high on the Street's list of takeover targets last year, but the stock has been on the ropes of late. It tumbled some 5% on Mar. 6, to 42, after the Food & Drug Administration issued an adverse patent ruling involving erythropoietin, or Epo. This red-blood-cell stimulant was to be marketed under the brand name Marogen by a joint venture of Upjohn and Chugai Pharmaceutical under license from drugmaker Genetics Institute. But on Mar. 6, the FDA ruled that GI's patent is invalid.

So the Street has turned its back on Upjohn. But wait. With its chances for an earnings jump pushed further back, "Upjohn is more vulnerable to a takeover," argues one New York money manager who is close to the company. He believes that insiders, including the Upjohn family, which controls 10% of the stock, had figured it could avoid a merger because of Epo's bright prospects. With that avenue closed, a buyout may be in the works again, says the pro.

Another observer who thinks Upjohn is ripe for a buyout is Charles La Loggia, the editor of Special Situation Report. He says Upjohn has been trading just the way Square D and Vista Chemical did before they received takeover bids. Square D has rejected a $1.9 billion tender offer from French electronics giant Schneider and is now seeking a white knight. Vista has agreed to be acquired by German oil company RWE-DEA.

Whispers are that Upjohn may renew contacts with British drug company Glaxo Holdings, which is believed to have made an unofficial $60-a-share offer in 1990. Upjohn and Glaxo said they don't comment on market rumors.