Takeover Rumors Or Good Pipeline Driving Warner-Lambert Stock Price?

Volatility in Warner-Lambert's share price, including a 4.8% one-day jump last month, have triggered renewed speculation on the firm. Interest in the company's new drug pipeline after an investors' meeting in Boston, is the view of some, while others attribute the stock move to speculation that Swiss drugmaker Roche could make a bid for W-L. Roche has an estimated $10 billion in cash and a desire to expand, as well as a history of making hostile bids.

Ron Nordmann of Deerfield Management said the company is "a perennial takeover candidate," and that investors are interested not for that reason but because "its fundamentals are improving." In 10 days alone in mid-August, the company gained about 10%, with analysts generally agreeing that the movement reflects growing optimism that the US Food and Drug Administration would soon approve the company's new lipid-lowerer atorvastatin, for which approval filing was made in June, and its new diabetes drug troglitazone.

Recently, Roche has been linked to possible takeovers of Zeneca or SmithKline Beecham. Deutsche Morgan Grenfell analyst Mariola Haggar explained that, "typically, when there is this sort of speculation, it's not unusual for other stocks to end up getting caught in the rumor mill as trades take it a step further." Most investors, she said, still expect further consolidation in the pharmaceutical industry, but that it is impossible to tell who, with whom or when.