Pfizer to diversify with deal for Wyeth
No. 1 drug maker Pfizer Inc. said Monday that it was buying No. 12 Wyeth for $68 billion in a deal that would quickly boost Pfizer’s revenue and profit and transform it overnight into a more diversified company less reliant on its dwindling drug pipeline.
New York-based Pfizer managed with one stroke to overshadow a full house of issues: a 90% drop in income, a hefty charge to end an investigation, a severe cut in its dividend, a shockingly low profit forecast for 2009 and thousands of job cuts starting immediately.
That’s all on top of the colossal problem triggering this deal: the expected loss of $13 billion a year in revenue for cholesterol fighter Lipitor starting in November 2011, when it gets generic competition.
Pfizer also plans to cut about 8,000 jobs, 10% of its workforce, as part of what it expects will be a staff reduction totaling 15% of the combined companies’ workers -- implying a total job loss of almost 20,000.
By buying Wyeth, Pfizer would mutate from a maker of blockbuster pills to a one-stop shop for vaccines, biotech drugs, traditional pills and nonprescription products for people and animals.
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. It comes as Pfizer’s 2007 fourth-quarter profit takes a brutal hit from a $2.3-billion legal settlement over allegations it marketed pain reliever Bextra and possibly other products for indications that had not been approved.
Pfizer, maker of impotence pill Viagra and Detrol for overactive bladder, said it would pay $50.19 a share for Madison, N.J.-based Wyeth, a 14.7% premium to the firm’s closing price of $43.74 on Friday.
Pfizer shares closed down $1.80, or 10.3%, to $15.65 on Monday. Wyeth shares ended 35 cents lower at $43.39.
Analysts were split on how good the deal was but saw no benefit for consumers.
“This deal doesn’t bring Pfizer the cure for Lipitor” revenue losses, but it brings short- and long-term cost savings, said Erik Gordon, biomedical analyst and professor at University of Michigan’s Ross School of Business.
Shortly after announcing the Wyeth deal, Pfizer said fourth-quarter profit plunged on a charge to settle investigations into off-label marketing. The company earned $268 million, or 4 cents a share, compared with profit of $2.72 billion, or 40 cents, a year prior. Revenue fell 4% to $12.35 billion from $12.87 billion.
Wyeth said its fourth-quarter profit declined 5.6% to $960.4 million, or 71 cents a share, down from $1.02 billion, or 75 cents, in the 2007 quarter. Revenue fell 7% to $5.35 billion.
