Time is running out for Wellcome as Glaxo pounces

Glaxo set the takeover clock ticking in its £9bn hostile bid for Wellcome yesterday, posting the offer document and announcing interim profits for the six months to December.

The bidder's shares closed 12p lower at 649p after Glaxo admitted that sales of its largest selling drug, Zantac, the ulcer treatment, had fallen 5 per cent, with turnover in the drug's largest market, the US, hit hardest.

That kept group sales flat at £2.85bn (£2.80bn) and restricted profits growth to 10 per cent from £998m to £1.10bn. After a higher tax charge earnings per share grew 4 per cent to 24.3p and the interim dividend was 1p higher at 10.0p.

Sir Richard Sykes, deputy chairman and chief executive, said the results reflected the actions Glaxo had taken to combat the tough trading conditions facing the industry.

But Wellcome said the results compared poorly with the 18 per cent increase in earnings per share it announced last week for the year to December.

John Robb, chief executive, said: "Glaxo's results highlight its desire to acquire a company with a record of strong growth. Its offer undervalues Wellcome and we are working energetically to develop a better offer."

There was still no evidence that Wellcome had persuaded a white knight to enter the fray, although it is thought unlikely that any of the large drugs companies being touted as possible counter bidders would show their hands much before the 28 February deadline imposed by Wellcome's biggest shareholder, the Wellcome Trust.

The Trust, which holds 39.5 per cent of Wellcome, has said it will accept Glaxo's cash and shares offer, worth 1077p a share yesterday, unless a better offer emerged within 21 days of the launch of the bid.

The Manufacturing Science and Finance Union, in a letter it drafted for Wellcome employees to send to their MPs, expressed concern about the "substantial job losses" at Wellcome's manufacturing and research plants that would follow a takeover.

The MSF warned that both sites might close and said that long-term scientific research would suffer. Glaxo, the union warned, would be unable to finance the large debts it planned to take on without substantial cost-cutting throughout both companies. SirRichard said the numbers of redundancies rumoured recently were "pure speculation", but admitted that there would be closures and job losses.

Zantac sales were hit in the US by the introduction of a generic rival in anticipation of which Glaxo had to negotiate increased discounts with its biggest buyers.