View from City Road: A merger might make sense for Wellcome

The obvious question about Wellcome's flat denial yesterday that the company had held talks about merging with a third party is - if not, why not? The past 18 months have seen the drug sector in turmoil as individual companies have struggled to come to terms with a radically different market place. Everyone has seemed to be talking to everyone about everything. It seems odd, to say the least, that Wellcome has not explored a solution that might have much to commend it.

Wellcome is a tempting target in many ways. It has a speciality - anti- virals - that would complement the price lists of many other pharmaceutical companies. It is also vulnerable in that it is over-dependent on one product, Zovirax. In addition, the trust that owns 40 per cent has made it clear it would like to reduce its stake further.

Clearly the trust is not about to assist in a hostile bid. So any deal would depend on convincing Wellcome's board of the logic behind a merger. So far John Robb, Wellcome's chairman and chief executive, has made no bones about his opposition to such a move. The relentless loss of top management from the group may hint at board-level disagreement.