By Published on .

Ad agencies that do business in the booming direct-to-consumer pharmaceutical category had to be sitting on pins and needles late last week.

Three blue-chip drug marketers that have shown a willingness to pony up millions for DTC advertising were locked in an extraordinary battle over which would merge.

It appeared Warner-Lambert Co. and American Home Products Corp. would pair to become the world's largest drug company in a deal valued at $72 billion. Then, just as the wedding vows were about to be taken, Pfizer stepped forward with a bid to take Warner-Lambert's hand for $82 million.


No matter which merger ultimately goes through, the new company would become the fourth-largest advertiser in the U.S., according to Advertising Age data. A combined Pfizer/Warner-Lambert would tally $1.78 billion in ad spending; American Warner would account for $1.68 billion.

The marketer would be topped only by General Motors Corp., Procter & Gamble Co. and Philip Morris Cos., and would leap ahead of DaimlerChrysler; Sears, Roebuck & Co.; Ford Motor Co.; and AT&T Corp.

The three pharmaceutical companies market a host of blockbuster drugs: Pfizer's Viagra; Lipitor, already jointly marketed by Pfizer and Warner-Lambert; and American Home's Premarin estrogen replacement drug.

American Home and Warner-Lambert market such well-known over-the-counter brands as Advil and Listerine, respectively.

Whichever new company emerges from the merger sweepstakes is expected to use its newly combined marketing muscle in the DTC area.

"It means the marketing budgets will be larger and they may have more room to maneuver for DTC investment," said Tom Drake, director of customer marketing information services for consultancy Rx Remedy.

The possible effects on agency assignments depend on how things shake out. But the craziness raises some interesting questions.

For example, would Warner-Lambert executives be as fond of Pfizer's main DTC agency, Cline Davis & Mann, New York, as are Pfizer executives? And would Warner-Lambert be willing to expand beyond its slim roster of just two agencies, Bates Worldwide and J. Walter Thompson Co.?


If American Warner becomes reality, what would happen to the lengthy roster of American Home agencies? In the DTC arena, American Home agencies include Robert A. Becker Euro RSCG, Klemtner Advertising and Rubin Ehren- thal, all New York, while its consumer-products business has a roster that includes Y&R Advertising, Grey Advertising and Lowe Lintas & Partners Worldwide.

"You're always concerned as to who your new client will be," said Sander Flaum, CEO of Becker. "But we're certainly confident that we'll not only be kept, but our business will grow with the combined" company.

The pharmaceutical merger sweepstakes came days after two mergers in the agency world, the merger of Lowe & Partners/SMS with Ammirati Puris Lintas and the coming together of Leo Group and MacManus Group.


"The trend among agencies parallels the trend among clients," said David Liebowitz, managing director at Burnham Securities. "Size is a primary consideration."

Analysts said drug companies are rushing to merge to combine research and development budgets -- their biggest expense -- as well as products coming down the pipeline and marketing budgets.

"Most industry observers are of the opinion that along with meaningful consolidation will come a meaningful pickup in promotions as well," Mr. Liebowitz said.

Both the American Warner proposal and the possible Pfizer/Warner-Lambert combination would bring little overlap in terms of Rx products.

As noted, Pfizer and Warner-Lambert already have a co-marketing deal, which in addition to Lipitor calls for them to share profits on other products developed

Most Popular
In this article: