Schering and Warner Merger Talks Continue

Warner-Lambert Co., seller of the top U.S. cholesterol-reduction drug, is holding merger talks with Schering-Plough Corp., maker of the world’s No. 1 anti-allergy pill Claritin, a person familiar with the talks said.

Discussions have gone on over the last two years and have intensified in recent weeks, the person said. No agreement is pending, though, and the talks could founder, the person said.

If they combined, the resulting company would be among the world’s 10 biggest drug makers, with a stock market value of about $125 billion. Together, they would be better able to spend the billions of dollars needed to find and market new drugs. Schering-Plough’s dependence on Claritin, which could lose patent protection in three years, makes the company a merger candidate, said U.S. Trust Co. analyst Jack Lafferty.

Shares of the two companies gained. In New York Stock Exchange trading, Warner-Lambert rose $1.69 to close at $68.69, and Schering added $1.25 to close at $48.75.

The two companies declined to comment, though Warner-Lambert’s top executive discussed mergers after an analysts meeting this week.

“Never say never, but we have no reason to do something now,” said Lodewijk de Vink, Warner-Lambert’s new chairman and chief executive.

If the companies remain independent, they risk falling behind rivals in the hunt for new medicines. Alone, neither can match the money that larger competitors are spending on drug research and development.

The larger drug companies can hire more scientists and buy more of the latest equipment than Madison, N.J.-based Schering-Plough, whose annual research budget topped $1 billion for the first time last year. Schering-Plough plans to boost its budget 15% in 1999. Warner-Lambert, based in Morris Plains, N.J., will spend $1.2 billion on research this year.

In addition, a combined company would be able to save $1 billion to $2 billion a year in overhead costs, said Hemant Shah, an independent drug industry analyst.