Flat Glaxo to activate bid for Wellcome

Glaxo will announce flat interim profits and declining sales of its most important drug later today as it officially launches its £9bn bid for control of Wellcome with the issue of the formal offer document. The posting of the offer sets the 60-day bid clock ticking and increases pressure on Wellcome to come up with the white knight it has said it is pursuing.

Although it is thought unlikely that any third party would express an interest publicly until the last possible moment, with the company's biggest shareholder, the Wellcome Trust, sticking with its provisional acceptance of Glaxo's cash and shares offer,Wellcome must come up with another bidder by the first closing date of the offer if it is to stand a chance of fending off the hostile bid.

Glaxo is constrained from buying Wellcome shares in the market until after the first closing date of the bid, 21 days after the posting of the document. With the trust's 40 per cent holding in the bag, however, it would be relatively easy for it to take control in the absence of a higher offer.

Analysts expect Glaxo's half-year results today to underline the urgency of the bid for the previously high growth company. Falling sales of Glaxo's biggest selling drug, anti-ulcer treatment Zantac, are expected to peg profits at £1.03bn for the six months to December compared with £1bn for the same period in 1993.

The results are also expected to show declining sales of Zofran, an anti-nauseant that is one of Glaxo's newer treatments. Trading margins will rise slightly thanks to cost-cutting, but the realisation of bond losses will knock investment income from last time's £73m to £49m.

Attention will focus on cost-cutting at Glaxo since the appointment of Sir Richard Sykes as chief executive. The viability of the bid is thought to hinge on the extent to which he can translate overhead reductions to the enlarged group.

Wellcome said yesterday it would be launching Lamictal, an anti-epilepsy drug, in Britain. It also has approval in the Netherlands and South Africa and is undergoing trials in 16 other countries.

Wellcome's shares closed unchanged yesterday at 1,018p.

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