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RORER COULD HAVE EXTRA CLOUT IN CARDIOVASCULAR MARKET WITH USV AND ARMOUR: REVLON ETHICAL DRUG BUSINESSES COULD ALSO SERVE AS SHIELD v. TAKEOVERS

Executive Summary

Rorer's preparations for the launch of Nitrolingual aerosol spray in the cardiovascular market in early 1986 could be bolstered significantly with the addition of the USV sales force, which already has experience with products in that class. Rorer has emerged quickly as the leading candidate to purchase USV and Armour from Revlon. Rorer took an initial step to diversify its drug line into the cardiovascular market 18 months ago with the purchase of Kremers-Urban ("The Pink Sheet" June 6, 1983, p. 5). The Kremers-Urban purchase brought an existing 100-person sales force to Rorer. USV, with its primary experience in the cardiovascular market, would increase that marketing experience significantly. USV and Armour combined have nearly 500 detailmen. In addition to Nitrolingual, Rorer had three cardiovascular compounds in study in 1984. USV already markets such cardiovasculars as Hygroton (chlorthalidone), Lozol (indapamide) and a sustained release nitroglycerin, Nitrospan. USV and Armour are available as part of the Revlon auction of health care units stemming from the Pantry Pride takeover. Rorer reportedly has a leg up on other contenders for the ethical drug components with a bid in the $700 mil. range. The Rorer deal could be complete by mid-January. By reaching to the $700 mil. level for the acquisition, Rorer is underlining its view of the importance of a strategic diversification in Rx markets. Kremers-Urban cost Rorer about $25 mil. in stock. In the Revlon deal, however, Rorer will probably have to use cash. Because of Pantry Pride's highly leveraged position, there is a demand for cash for the divestitures. Rorer has about $75 mil. in cash readily available, according to figures published in the company's recent third quarter interim operating statement and the annual report for 1984. The firm shows about $25 mil. in cash and marketable securities and a $50 mil. line of credit. While an acquisition of USV and Armour would add significant new debt to Rorer, the move could have several favorable repercussions. The increased debt could act as a shield to discourage raiders. Rorer has been the subject of takeover talk and maneuvering for several years -- including a round with Cooper Labs earlier this year. The increased size and marketing strength in the U.S. could also make Rorer more valuable to a serious suitor. With the purchase of Armour and USV, Rorer would more than double the size of its 400-person sales force and would broaden its exposure to the hospital market. The Monsanto purchase of Searle for $2.7 bil. sets a benchmark for the value of an existing U.S. pharmaceutical business to companies trying to enter the business. The "Street" apparently is not afraid of a highly leveraged move by Rorer: the stock moved up 5% during the week in which word of Rorer's interest in the Revlon divisions began to spread. Boots and ICN have also been discussed as potential buyers of the Revlon drug businesses. Part of the Revlon drug business was purchased from ICN in the 1970's. Revlon's 1984 ethical drug sales in the U.S., Canada and Puerto Rico were $235 mil. The firm generated another $175 mil. in sales outside those markets. During the same period, Rorer's pharmaceutical sales were $313.7 mil. The company's surgical product sales totalled $208.5 mil. Roughly 70% of Rorer's sales are in the U.S.
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