Glaxo, Bristol-Myers 'in talks'

LONDON, England -- GlaxoSmithKline, Europe's biggest drugs company, and Bristol-Myers Squibb have held preliminary talks about the possibility of a merger, a report has said.

Discussions are at a exploratory stage, aimed at ascertaining whether a Glaxo (GSK) purchase of Bristol-Myers (BMY) would work, rather than the details of how to execute it, the New York Times said on Friday, citing executives close to the talks.

Glaxo Chief Financial Officer John Coombe said earlier this month his company is monitoring developments at U.S.-based Bristol-Myers, along with other pharmaceuticals companies that may be ripe for a takeover.

The pharmaceuticals industry is facing more consolidation as companies struggle to develop new products to combat growing competition from low-price generic drugs.

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Glaxo's shares hit two-year lows this week after a U.S. court quashed patents on its top-selling antibiotic drug. The company warned the decision could dent earnings per share growth if generic drug makers start producing cheaper copycat versions of its Augmentin drug, which has global sales of $2 billion, including $1.3 billion in the U.S.

Bristol-Myers is seen as a likely takeover target after being hit by a number of product setbacks. It is facing competition from generic versions of three of its main products -- cancer drug Taxol, diabetes treatment Glucophage and anxiety medicine BuSpar.

If London-based GSK was to buy Bristol-Myers, the combined company would have a market capitalisation of $200 billion.

Glaxo's stock was little changed at 1439 pence in early London trading on Friday.