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Drug Merger Euphoria Sends Almost Everything Up

"As soon as I came to the City," David Smith, managing director of

Cantor Fitzgerald's

London office, recalled this morning, "I was told you never short



Sage advice. Friday's late-breaking news that

Smith-Kline Beecham

(SBH) - Get Sally Beauty Holdings, Inc. Report

up 1 7/16 to 118 13/16,


(PFE) - Get Pfizer Inc. Report

up 2 7/16 to 84 3/16,

Bristol-Myers Squibb

(BMY) - Get Bristol-Myers Squibb Company Report

up 3 1/2 to 103 3/16,

Johnson & Johnson

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(JNJ) - Get Johnson & Johnson Report

up 2 to 68 15/16,

Eli Lilly

(LLY) - Get Eli Lilly and Company Report

up 3 to 70 5/8,

Pharmacia & Upjohn


up 1 7/16 to 40,

Schering Plough


up 4 11/16 to 77 1/16, and

Warner Lambert


up 6 to 156 1/2.

That big list is one of the reasons the market may be justified in this round of merger frenzy, according to Jeffrey Applegate, chief investment strategist at

Lehman Brothers


"You still have a fragmented industry," Applegate said of the drugs. "This industry is unlike, say, the food industry. The players in the food industry, they already have large single- or double-digit market shares." In contrast, a combined SmithKline and Glaxo, which would be the world's largest drug company, would only hold 7.5% of the global market share. There's room for plenty more mergers as the global drug companies vie to be the biggest.

"I think that this drug story will play again and again," said Cantor's Smith. "No one wants to get left behind -- in this business big is beautiful. I suits them with their research and development. It suits them as they bring new drugs to market. All of this guys are going to have to join up with someone. We're going to merge them up, and demerge them in a few years, just to keep the cycle up so my children are employed."

American Home Products


, which SmithKline left sobbing at the altar, was down 2 1/2 to 92 15/16.

* * * * *

Despite all of the recent attempts at damage control, on a day when most stocks are higher, paired-share REITs are again suffering on concern that they will lose their special tax status.



was down 1 5/8 at 52 5/8 ,


(MT) - Get ArcelorMittal SA Report

was off 15/16 at 32 1/8,

Patriot American Hospitality

(PAH) - Get Element Solutions, Inc. Report

was off 5/16 at 25 5/16 and

First Union Real Estate Investments


was down 11/16 to 73,


(HAL) - Get Halliburton Company Report

was down 13/16 to 44 1/8 and the

Philadelphia Stock Exchange Oil-Service Index

was off 0.45 to 96.92.