Bloomberg News (1/26, Pettypiece, Randall) reports that Pfizer Inc.'s bid to purchase Wyeth could set off a series of other mergers in the pharmaceutical industry, as that sector is "buffeted by a thinner pipeline of new products and increasing generic competition. Johnson & Johnson, Merck & Co., and Bristol-Myers Squibb Co. are among the companies that are most likely to strike a major deal, analysts said. The chief executives at these companies have said they are looking for acquisitions, and the three drugmakers have a combined $29 billion in cash and short- term investments to make purchases." The piece continues to analyze the different drugs that are going off-patent, the new products in the "pipeline," and the financial factors in play. In a separate article, Bloomberg News (1/26, Pettypiece, Randall, Mider) reports that Pfizer offered $66.8 billion for Wyeth, whose "shareholders would get $50.19 a share, including $33 in cash and 0.985 Pfizer shares," according to an unnamed source. Bloomberg notes that Pfizer "gains the depression treatment Effexor (venlafaxine) and pneumonia vaccine Prevnar in the transaction, and may raise its annual sales by 46 percent to $70 billion. That would help the New York-based company offset some of the $12 billion in revenue it begins losing in 2011 when the Lipitor cholesterol pill gets generic competition."
The Wall Street Journal (1/25, Karnitschnig, Rubenstein) reported that Pfizer is "expected to pay between $65 billion and $70 billion" for Wyeth, calling the deal "a risky effort to shore itself up ahead of huge disruptions in the next few years." The Journal reports that Pfizer's desperation comes from the impending end of Lipitor's patent in 2011, noting that this single drug has generated some one quarter of Pfizer's revenue. "Pfizer CEO Jeff Kindler has cut costs and laid off thousands of employees since taking the New York drug giant's helm in the summer of 2006, but analysts and investors consider those cuts insufficient to make up for the pending loss of Lipitor. Mr. Kindler is expected to remain Pfizer's CEO if the deal goes through."
The AP (1/24, Johnson, Seaman) reported that the merger "could be valued at more than $60 billion, the biggest in recent memory." The AP added that should the deal go through, Pfizer would change from "basically a pure pharmaceutical company into a broadly diversified healthcare giant, given Wyeth's huge presence and revenue in biotechnology drugs...and consumer health products ranging from Advil to Robitussin."
Pfizer board approves merger. The New York Times (1/25, Sorkin, Wilson) reports that Pfizer's board approved the acquisition last night, noting that the merger "would not only create a pharmaceutical behemoth but would be a rarity in the current financial tumult: a big acquisition that is not a desperate merger of two banks orchestrated by the government. It would also be the first big merger backed by Wall Street in months. While credit has been notoriously tight of late, five banks have agreed to lend Pfizer $22.5 billion to pay for the deal. Pfizer, which has roughly $26 billion in cash, would finance the deal through the loans, some of its cash and stock." Notably, the deal "almost came unhinged at the 11th hour."
Previous coverage by Bloomberg News (1/26, Pettypiece, Randall, Mider) reported that board members at Pfizer and Wyeth were in session to consider the merger, noting that under the deal "Pfizer Chief Executive Officer Jeffrey Kindler, 53, will lead the combined companies, two people familiar with the discussion said today." According to a source, "an announcement could come early this week."
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