Looking For The Right Pill

In drug mergers, cost-cutting matters less than filling the new-product pipeline

It's a kind of magic. Announce a merger between two drug companies that will generate huge cost savings. Then, watch share prices soar. That's what happened when Swiss pharmaceutical giants Sandoz Ltd. and Ciba-Geigy PLC announced their amalgamation on Mar. 7. After the news, the combined market values of the two companies rose $12 billion, to $76 billion, as investors totted up the likely efficiencies. A similar jump in value occurred last August, after Pharmacia and Upjohn Co. revealed plans to merge. No wonder investors are eagerly scouting the market for other likely takeovers and mergers in the global drug business.

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