MercoPress. South Atlantic News Agency

Pfizer-Wyeth defy stress and merge into pharmaceutical giant

A pharmaceutical giant was created Monday after US drug maker Pfizer announced it would be acquiring Wyeth in a 68 billion US dollars merger deal that could spark hopes of further consolidation across the industry.

The deal, which the two claimed would create the world's largest research-based pharmaceutical company, will help Pfizer generate 4 billion in cost savings. It is looking for a new revenue source as its blockbuster Lipitor cholesterol treatment will begin to face generic competition in 2011. Under the deal, each outstanding Wyeth share will be converted into the right to receive 33 US dollars in cash and 0.985 of a share of Pfizer common stock. The two companies said the combined group will be number one in terms of biopharmaceutical revenues in the United States with some 12% market share. It will have around a 10th of the market in Europe. Pfizer and Wyeth expect the transaction to close at the end of the third quarter or during the fourth quarter 2009, once Wyeth shareholders have approved the deal. Pfizer, which is headquartered in New York, has major research and development locations in the England. In total it employs 85,000 colleagues in more than 150 countries. Wyeth, which also has its corporate headquarters in the US, has a presence in over 80 countries, including four sites in the south of England. Pfizer recently announced plans to cut 10% of its global workforce, or 8,000 jobs, and shut some manufacturing sites. It also reported a 90% drop in profit to 268 million US dollars in the fourth quarter because of a 2.3 billion legal settlement. Excluding the charge, its profit rose to 65 cents per share from 40 cents per share a year earlier. Pfizer, the world's biggest drugs firm, also makes Viagra, while Wyeth produces antidepressant Effexor XR and Prevnar. Pfizer has raised 22.5 billion US dollars from banks to finance the deal and said it would reduce dividends "in connection with the proposed transaction between Pfizer and Wyeth". "The merger will be financed through a combination of cash, debt and stock," the companies said. "With our combined biopharmaceuticals business, it [the combined company] will lead in primary and specialty care as well as in small and large molecules," said Jeffrey Kindler, chairman and chief executive of Pfizer, who will run the new company. The deal is the biggest merger announced on Wall Street since the credit crunch, and the largest merger in the pharmaceutical industry since Pfizer bought Warner-Lambert for 93.4 billion in 2000. Commenting ahead of the deal this morning, analysts at Charles Stanley stockbrokers in London said: "Whilst we continue to take the view that the future for a sector facing an unprecedented off-patent "black hole" lies in developing exposure to Asia, to emerging markets generally and to biologics, Pfizer appears determined, if rumours are to be believed, to drive expansion through size".