Article preview from"The Pink Sheet" DAILY January 27, 2009
In the largest pharma merger in history, Pfizer will acquire rival Wyeth in a deal valued at approximately $68 billion, a combination that could usher in a new era of consolidation within the drug industry. Read more now...
Article preview from"The Pink Sheet" DAILY January 27, 2009
In the largest pharma merger in history, Pfizer will acquire rival Wyeth in a deal valued at approximately $68 billion, a combination that could usher in a new era of consolidation within the drug industry.
With the acquisition, Pfizer - already the largest drug company in the world - broadens its footprint in the market, creating a drug powerhouse with combined sales of more than $71 billion, based on 2008 revenues. The companies announced the acquisition Jan. 26 after merger speculation intensified last week ("The Pink Sheet" DAILY, Jan. 23, 2009).
With the patent expiration of Lipitor approaching in 2011, Pfizer had few avenues available to address the looming revenue loss of more than $12 billion. Through acquisitions, Pfizer had growth into a goliath, but one that was about to face a lethal blow. With other patent expirations following on the heels of Lipitor, investors were pushing Pfizer to take drastic measures. Without an acquisition, Pfizer was on track to lose 70 percent of its 2007 revenues of $48.6 billion by 2015.
With Wyeth, Pfizer gains a levee to stem the encroaching storm. And some expect the deal to set the stage for more mergers to follow, as other big pharmas similarly seek to weather their own patent challenges.
But whether or not a mega-merger is the solution to Pfizer's problems remains to be seen. The addition of Wyeth doesn't position Pfizer for near-term growth, but rather will allow the company to maintain its 2008 revenues and earnings-per-share levels through 2012. With that in mind, investors may have to keep an eye on the horizon toward the long term.
"We're obviously very focused on here and now and 2012, but this is a very long-term business, and we believe this deal positions us extremely well for long-term shareholder value creation," CEO Jeff Kindler said during a same-day conference call. The deal is expected to close in the second half of the year.
Deal positions Pfizer to become biologics player
Read the rest of this story now, start your 30-day trial to "The Pink Sheet" DAILY today.
