Shares in Roche Holding, the Swiss drugs giant which has long been favourite to bid for Zeneca, fell as dealers anticipated it launching a bid as a consolation prize to losing out in the merger of its Swiss rivals.
The 96p rise in Zeneca's share price to pounds 13.77 came in spite of the group's own defiant declaration of independence. Unveiling profits for 1995 at the top end of analysts' expectations, the chief executive, David Barnes, dismissed talk of throwing in his lot with a bigger company. "As far as we are concerned, our policy is to drive the business, which clearly has potential for substantial growth, as far and as hard as possible." With seven highly promising new products in the pipeline, "we have our hands full and a very rich diet just driving forward on our own".
Analysts warned that Zeneca, now valued at pounds 12.5bn by the market, would be expensive at these levels. One said: "To the extent that they are smaller than some of the bigger companies, they are a target. But at this sort of price, it makes it very difficult to justify any sort of takeover. I think a merger is much more likely."
The market welcomed the company's figures, which showed underlying profits rising 15 per cent to pounds 878m in the year to December, and news of plans to divest two underperforming activities. An agreement has been signed with Sun Chemical Corporation of the US to sell the speciality inks business for $62m, while discussions are taking place with a number of parties for the disposal of the textile colours operation. The two divisions form part of Zeneca's specialities activities, which, with profits flat at pounds 56m, was the only area of the group not to raise its returns last year.
John Mayo, finance director, said margins in specialities would rise to above 8 per cent, up from 5.4 per cent in 1995, once the disposals were completed. The news comes hot on the heels of February's disposal of a half-share of the seeds business, which is expected to eliminate losses, which more than doubled to pounds 48m last year.
Zeneca also won full marks from analysts for the performance of its core pharmaceuticals business. Drugs sales advanced 10 per cent to pounds 2.16bn, the first time they have broken through the pounds 2bn mark, sending profits before exceptionals 9 per cent ahead to pounds 687m. US sales growth at 10 per cent outpaced the market by 4 percentage points, led by Zeneca's best- selling Zestril blood pressure and heart drug.
Exceptional items of pounds 259m had been foreshadowed in previous announcements. Of the total, pounds 197m related to a goodwill write-off on the sale of the seeds stake and a further pounds 65m concerned to a restructuring programme unveiled earlier this year.
The company revealed that 550 jobs out of a total workforce of 31,500 would be lost as a result of the rationalisation. In the UK, 370 jobs are to go, principally as a result of the Laser Project to rationalise the manufacturing and supply chain.