Hoechst, Rhône-Poulenc plan to merge

Undaunted by numerous failed mergers and acquisitions in the pharmaceutical industry in 1998, two companies announced they were well into merger discussions at press time.

German giant Hoechst AG and French powerhouse Rhône-Poulenc SA revealed that they intend to combine their pharmaceuticals and agricultural business into a new company called Aventis.

Incorporated in France and headquartered in Strasbourg, Germany, Aventis would be the first of two steps toward a full merger of equals. In the pharmaceutical industry, the merger would directly involve Hoechst Marion Roussel, Rhône-Poulenc Rorer and Pasteur Mérieux Connaught.

"We want to create a new company, with European roots and global reach, to take full advantage of the extensive opportunities of life sciences in the 21st Century," said Jene-Rene Fourtou, chairman of Rhône-Poulenc, and Jurgen Dormann, chairman of Hoechst, in a joint statement.

They added: "With its new culture, increased [research and development] resources, competitive position in emerging technologies, enhanced pipeline and strong marketing muscle, Aventis will have a solid platform for sustained medium- and long-term growth in both sales and profitability."

Using 1997 data from the two merging companies, the combined Aventis would have tallied roughly $20 billion in 1997, with pharmaceuticals accounting for 72% of the total. It would have employed 95,000 people, 3,500 of which would have been sales representatives. Its combined research and development budget would have totaled approximately $2.5 billion, one of the largest in the world.

Total estimated savings from the merger would reach $2.1 billion within three years, 60% of which would be a result of changes in the pharmaceutical division. Although the companies acknowledged that some of "these synergies would result in job reductions," they also indicated that it would not be content to merely combine sales forces. Aventis would aggressively hire more sales reps.

In core therapeutic areas, Aventis would be the world's number one company in the development, manufacture and marketing of vaccines, number two in biologicals, number three in cardiovascular disease and diabetes and number four in anti-infectives and asthma and allergy. The proposed merger would also strengthen both Hoechst Marion Roussel's and Rhône-Poulenc Rorer's oncology positions.

The new pharmaceutical Goliath would boast a pipeline of more than 60 drugs, including Actonel, Arava, a rheumatoid arthritis treatment, cariporide, ImuLyme, Synercid and an antipsychotic compound.

Currently, Hoechst Marion Roussel's leading products include Cardizem CD, a calcium channel blocker; Amaryl, a type 2 diabetes medication; and Refludan, a cardiovascular disease treatment. Rhône-Poulenc Rorer's key products include Lovenox, a low-molecular weight heparin; Taxotere, an oncology medicine and Azmacort, an asthma product line.

In the pharmaceutical division of the new company, Igor Landau would become chairman of Aventis Pharma and Richard Markham would be named chief executive officer.

The merger is scheduled to go through by mid-1999, although it may meet with some resistance in Europe due to political nationalism.

Even if the merger is successful, both Hoechst and Rhône-Poulenc will continue to trade publicly under the names Aventis Hoechst and Aventis Rhône-Poulenc. PR