IHS Global Insight Perspective | |
Significance | The price tag far exceeds other pharma acquisitions, including the Eli Lilly-Imclone and Mylan-Merck KGaA generics unit deals, as well as the US$7.4-billion Ivax takeover by Teva Pharmaceuticals. |
Implications | The merger of Pfizer and Wyeth will consolidate Pfizer's position at the top of the leader board in terms of revenues in the pharmaceutical industry. The firm will inherit Wyeth's profitable vaccine business, led by Prevnar, and also its research pipeline, with eight products in Phase III trials. |
Outlook | For the firms involved in the deal, the merged entity will see cost-cutting measures, including employee lay-offs and rationalisation of product portfolio in accordance with anti-trust laws. In the wider industry context, just as Pfizer's earlier big-ticket acquisition had sparked a wave of consolidation among Big Pharma firms, this venture is also likely to do so. |
U.S. pharma major Pfizer confirmed its intention to acquire Wyeth Pharmaceuticals entering into a definitive merger agreement in a cash and stock transaction. This deal, valued at US$50.19 per share, will have a price tag of approximately US$68 billion. According to Pfizer, the deal is expected to yield cost savings of US$4 billion, which will be realised by the third year of closing, namely 2011. Main financial segments such as selling, administrative and general, research and development (R&D), and manufacturing costs are all expected to feature in the estimated savings figures for Pfizer. The takeover deal highlights Pfizer's strategic priorities that will be enhanced. This includes inline and pipeline patent-protected portfolio, namely in Alzheimer's, oncology, inflammation, pain and psychosis, together with an increasing presence in biotherapeutics and vaccines, presence in emerging markets, and a lower, flexible cost base.
Wyeth: Selected R&D Pipeline as of 16 October 2008 | |||
Drug Candidate | Indication | Therapeutic Area | Clinical Trial Phase |
Moxidectin (oral tablets) | Onchocerciasis (river blindness) | Infectious Disease | Phase II |
Tygacil (IV) | Hospital-acquired pneumonia | Infectious Disease | Phase II |
Anrukinzumab (IMA-638) | Asthma | Inflammation | Phase II |
TRU-015 (IV) | Rheumatoid arthritis | Inflammation | Phase II |
Relistor | Opioid-induced constipation and chronic pain | Metabolic | Phase II |
Dibotermin alfa-CPM | Fracture Repair | Musculoskeletal disorders | Phase II |
ACC-001 (IM) | Alzheimer's disease | Neuroscience | Phase II |
Pristiq | Fibromyalgia; | Neuroscience | Phase II |
SAM-531 | Alzheimer's disease | Neuroscience | Phase II |
Vabicaserin HCl | Schizophrenia | Neuroscience | Phase II |
Bosutinib | Breast cancer combination therapy | Oncology | Phase II |
Inotuzumab ozogamicin | Diffuse large B cell lymphoma/non-Hodgkin's' lymphoma | Oncology | Phase II |
Neratinib | Breast cancer | Oncology | Phase II |
MnB rLP2086 | Meningococcal Serogroup B | Vaccines | Phase II |
Tygacil | Diabetic foot infection | Infectious Disease | Phase III |
Protonix | Gastrointestinal reflux disease (paediatric) | Metabolic | Phase III |
Bapineuzumab (IV) | Alzheimer's disease | Neuroscience | Phase III |
Bosutinib | Chronic myelogenous leukaemia | Oncology | Phase III |
Inotuzumab ozogamicin | Follicular non-Hodgkin's' lymphoma | Oncology | Phase III |
Torisel (IV) | Renal cell carcinoma combination therapy | Oncology | Phase III |
13vPnC (IM) | Invasive pneumococcal disease (adult and infant) | Vaccines | Phase III |
Bazedoxifene/conjugated estrogens | Menopausal symptoms/osteoporosis | Women's health | Phase III |
Source: Wyeth | |||
In a dramatic move, Pfizer has simultaneously announced a cut of about 8,000 in employee strength effective immediately, according to the Associated Press. The source further notes that in total the firm will cut 10% of its workforce over the next three years. Clarity over this issue is awaited from the pharmaceutical firm. Separately, the two firms also reported their fourth-quarter and full-year results, further accentuating interest in a takeover deal. Both firms registered pressures in their revenues and net profits in the periods under review.
Outlook and Implications
The acquisition of Wyeth by Pfizer is a strategic move expected to cushion some of the expected drop in product-revenue growth in the next five years. The deal itself is the largest of its kind in the pharmaceutical industry ahead of the Teva-Ivax deal in 2007/08. It signifies the consolidation of Pfizer as the top player in terms of revenue in the pharma industry and particularly in comparison with other Big Pharma firms. The confirmation of the Wyeth acquisition has meant that Pfizer's earlier overtures towards Crucell (Netherlands), another biotech, and rumours involving Amgen (U.S.) have been summarily quashed. The interest in Wyeth is mainly driven by Pfizer's lack of R&D pipeline strength and the apparent opportunities in the biotech sector. Wyeth has so far projected its pneumococcal vaccine Prevnar as the frontline vaccine, and this has contributed to topline growth consistently since its launch. However Wyeth's other product portfolio, particularly in terms of its top ten drugs, indicate some shared vulnerabilities with Pfizer in terms exposure to generic competition. Along with Pfizer's Lipitor, Wyeth's Effexor, too, is expected to face generics in the short term, affecting topline revenue growth.
Still, there are some prospective growth factors in Wyeth's pipeline, including Viviant for osteoporosis, and Enbrel for juvenile rheumatoid arthritis. The year ahead will see Pfizer lobbying hard to garner the requisite backing from banks and financial institutions to fund this takeover, which in a recessionary climate will be taxing. In fact, this is probably one of the reasons why Wyeth has proved to be an attractive target for acquisition, with a lower valuation than previously in 2007 when Pfizer considered acquiring the firm. Pfizer is expected to effect a series of portfolio rationalisation efforts in order to comply with anti-trust laws.
Related Articles
- United States: 23 January 2009: Pfizer-Wyeth M&A Rumour Locks Spotlight on Industry Consolidation