Warner-Lambert, A "Win-Win Situation" For Shareholders

Warner-Lambert, long favored by many as a takeover play, is emerging as a potential "win-win" situation for shareholders, based on the increased visibility of its exciting new product pipeline, say drug analysts Jami Rubin and Glenn Novarro of Schroder Wertheim. However, they add, if new products fail to perform, management's strategic options would be curtailed severely, enhancing the likelihood of a takeover, and thus providing shareholders with another path to higher returns.

The company's new drug pipeline, highlighted by troglitazone and atorvastatin, has the potential to generate over $1.5-$2.0 billion in sales over the next five to six years, helping to increase the volume of the company's relatively small ($2.4 billion) pharmaceutical business to over $5 billion. By the year 2000, the analysts estimate earnings of $2.50 per share from new products.

New pharmaceutical products have the potential to fuel mid- to upper teens percentage earnings per share growth during 1997-2000, compared to essentially no growth since 1992, they note, adding their EPS estimates as follows: $5.25, up 8%, in 1996; $6.15, up 17%, in 1997; and $7.12, up 16%, in 1998.