Pfizer-Wyeth create $68-billion blockbuster deal

27 January 2009

Pfizer and Wyeth have announced that they have entered into a definitive merger agreement under which Pfizer will acquire Wyeth in a cash-and-stock transaction currently valued at $50.19 per share, or a total of approximately $68 billion.

Last week the two companies wre reported to be in merger talks (See: Pfizer in talks to acquire Wyeth for $60 billion) The world's top drugmaker, Pfizer has been wrestling with a dearth of new drugs and expecting a major revenue hit next year when its cholesterol-fighter Lipitor faces generic competition, attempted to strengthen its business by acquiring Wyeth, which will give it more than a single blockbuster drug to help ride out the coming los in revenues once generic manufacturers start making their versions of Lipiitor.

Wyeth's management team is expected to depart following the merger. The combined company could save $4 billion annually through the streamlining of operations.

Though Wall Street has given the merger a thumbs up, the deal is just said to have brought some time for Pzifer to retain its number 1 position. The real survival and growth will have to come from new drug discovery and launch which is a lengthy and expensive procedure.

It takes 15 years and $800 million to bring a drug to market. In the 1990s, the sector boomed thanks to a succession of "blockbuster" drugs, each with sales of more than $1 billion per year.
Mergers and in-licensing have given a short-term boost to pharmaceutical companies' depleted new-drug pipelines.

The cash-and-stock deal, one of the industry's biggest ever, is expected to close late in the third quarter or in the fourth quarter. Pfizer said it was financing one-third of its $68 billion takeover of rival Wyeth with debt and had received a commitment from a syndicate of five banks - J P Morgan Chase (JPM), Bank of America Merrill Lynch (BAC), Barclays, Citigroup (C) and Goldman Sachs (GS) -- for the financing.