DRUG MERGER SET : ANNOUNCED DEAL OF WHOLESALER BERGEN BRUNSWIG, MAKER IVAX SENDS COMPANIES' STOCKS TUMBLING.

Byline: Catherine Wilson Associated Press 

A $1.65 billion merger announcement by drug wholesaler Bergen Brunswig Corp. and generic drug giant Ivax Corp. sent both stocks tumbling Monday primarily due to Ivax's recent weakness in a cutthroat business.

Executives touted the new company as a combination of Bergen Brunswig's nationwide distribution network with Ivax's drug portfolio and manufacturing.

``We can cut costs in the supply chain and help make health care more affordable,'' said Donald Roden, the Bergen Brunswig president who will be chief executive of the new company.

But Bergen Brunswig, one of the nation's biggest drug wholesalers, ``is a very solid, steady, almost boring type of stock, and Ivax has been wild and woolly,'' said Robert Wasserman, an analyst with Southeast Research Partners.

The deal came on the same day that Ivax reported losing $179 million, or $1.47 a share, in the third quarter, due to stiff price competition, declining sales, write-offs and the costs of a reorganization. Revenues fell 28 percent to $223 million. In the same quarter last year, Ivax earned a profit of $27.6 million, or 23 cents a share, on $310 million in revenues.

The loss included write-offs of $104 million in assets and inventories and expenses of $14 million for restructuring, factory shutdowns and other consolidation measures.

Acknowledging Ivax's troubles, the deal values the company at just $13.75 a share, or more than $2 below its closing price Friday of $15.87-1/2.

Nonetheless, Ivax shares fell below the deal price Monday, plummeting $3.37-1/2, or 21 percent, to $12.50, on the American Stock Exchange. Bergen Brunswig lost $5.12-1/2, or 16 percent, to $27.62-1/2 on the New York Stock Exchange.

Ivax, the nation's biggest generic drug company, was once a high flier, with $114.8 million in 1995 profits. As health maintenance organizations increased their use of cheaper generic drugs, its shares sold near $50 in the early 1990s and were worth $31 a year ago.

Miami-based Ivax manufactures generic substitutes for dozens of popular drugs including Proventil and Ventolin for asthma, Eli Lilly & Co.'s antibiotic Ceclor, and Searle & Co.'s high blood-pressure drug Verapamil. It also distributes generics made by other companies, makes intravenous drugs and nutritional fluids used in hospitals and has a small line of brand name drugs.

Last year, Ivax tried to merge with Hafslund Nycomed AS of Norway, the leading maker of X-ray dyes, in a bid to broaden its product line and gain more overseas distribution. That deal fell through when Hafslund concluded it couldn't get the required two-thirds approval from its shareholders.

This year, the generic drug industry has seen drastically increased competition, driving down prices and cutting profits for many leading companies, including Ivax.

Some investors fear a combination of Bergen and Ivax could result in lost sales of Ivax drugs to other wholesalers who would view the new company as a competitor.

Nonetheless, the companies' executives remained optimistic in the face of Monday's stock declines.

Joe Jones, an Ivax spokesman, said the cost savings from the merger would more than offset any lost sales.

Roden predicted that, through consolidating operations, the companies can save $30 million in the first year. More importantly, Roden said Bergen has the distribution channels to significantly increase sales of Ivax drugs.

``So we end up with both short-term and long-term (profit) margin generators,'' he said.

Gruntal & Co. analyst David Saks agreed that, over the long term, the deal is attractive because it is creating ``a leaner, richer, more powerful company in market share and product offerings.''

The merger, if approved by shareholders and antitrust regulators, would create a new company called BBI Healthcare Corp. with more than $13 billion in annual revenues.Ivax shareholders will get 0.42 of a share of the new company for each of their shares, while Bergen Brunswig shareholders will get one share for each share they now hold.The board of directors will have nine members from Bergen Brunswig and eight from Ivax.