Pfizer Buys Wyeth and Cuts Jobs - Pharmaceutical Technology

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Pfizer Buys Wyeth and Cuts Jobs


ePT--the Electronic Newsletter of Pharmaceutical Technology

New York (Jan. 26)—Pfizer will purchase Wyeth (Madison, NJ) under a definitive merger agreement approved by both companies’ boards of directors. The deal is valued at $50.19 per share, or about $68 billion total. The transaction will be financed through cash, debt, and stock. A group of banks committed to finance a total of $22.5 billion in debt.

The combined entity will be one of the most diversified companies in the global healthcare industry, according to a Pfizer press release. The drugmaker predicts that no medicine will account for more than 10% of the combined company’s revenue in 2012. The transaction enhances Pfizer’s product portfolio and, with the acquisition of biopharmaceuticals such as the “Enbrel” arthritis treatment and the “Prevnar” pneumococcal vaccine, reduces its dependence on small molecules. The combined company will have products marketed in several growing therapeutic areas, a strong product pipeline, increased scientific and manufacturing capabilities, and a global presence.

The acquisition of Wyeth will save the combined company roughly $4 billion, according to a Pfizer press release. Pfizer also expects the merger to increase its adjusted diluted earnings per share (EPS) in the second full year after closing. The company’s reported diluted EPS for the fourth quarter of 2008 were $0.04, a 90% reduction from the $0.40 in the fourth quarter of 2007. The loss reflects a $2.3-billion charge to resolve investigations into the company’s off-label marketing practices.

Pfizer also announced a new cost-reduction initiative that is expected to save it approximately $3 billion by the end of 2011. The initiative will entail a 10% reduction in the company’s workforce, including positions in sales, manufacturing, research and development, and informational and administrative organizations. This reduction follows the elimination of 4700 positions in 2008, about 6% of Pfizer’s total workforce. In addition, Pfizer plans to reduce its number of manufacturing sites from 46 to 41. Pfizer expects to incur costs of approximately $6 billion on a pretax basis resulting from this program.

As the merger was announced, Wyeth withdrew from discussions with Dutch biopharmaceutical company Crucell (Leiden, The Netherlands), according to a statement on Crucell’s website. The two companies had been in “friendly discussions” regarding a possible merger, as reported in the Jan. 15, 2009 issue of ePT.

The Pfizer–Wyeth merger reflects the current industrywide focus on biopharmaceuticals. Another recent example, reported in ePT, is the joint venture that Teva Pharmaceutical Industries (Jerusalem) and Lonza Group (Basel) formed on Jan. 20, 2009. The companies will collaborate to develop, manufacture, and market several affordable and safe biosimilars. The joint venture is scheduled to begin during the first quarter of 2009, subject to regulatory approvals. Teva and Lonza expect their partnership to help them secure a leading position in the emerging biosimilars market, according to a Teva press release.

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