Drugmakers Pfizer and Wyeth were closing in on a deal worth US$68 billion that could be announced before the markets opened yesterday, published reports said.
The New York Times and Wall Street Journal reported on Sunday evening that Pfizer, the maker of Lipitor and Viagra, was working to finish financing for the deal, the biggest US merger in three years.
The companies’ boards met on Sunday to consider the bid, people familiar with the talks said. Wyeth shareholders would get US$50.19 a share, including US$33 in cash and 0.985 Pfizer shares, one of the people said. That is a 29 percent premium to Wyeth’s price on Thursday, before the talks became public.
Pfizer chief executive officer Jeffrey Kindler, 53, would lead the combined company, two people said.
Sources at Pfizer could not be immediately reached for comment. A Wyeth spokesman said the company had no comment.
A deal would increase Pfizer’s revenue by half and add strength in biotech drugs, vaccines and over-the-counter products, including the Advil and Robitussin brands.
A deal would help Pfizer cushion itself against a steep revenue decline expected over the next several years as Lipitor, the world’s best-selling drug, and other major products lost patent protection.
The drugmaker is expected to lose billions of dollars in sales to cheaper generics.
Acquiring Wyeth would transform Pfizer from a pure pharmaceutical company into a broadly diversified health care giant, given Wyeth’s huge presence in biotech drugs, vaccines including the blockbuster pneumococcal vaccine Prevnar, veterinary medicines and consumer health products.
Biotech drugs, produced in living cells, are seen as hot commodities because they generally command high prices and have little to no risk of generic competition. Wyeth’s offerings include blockbuster rheumatoid arthritis drug Enbrel (sold jointly with Amgen Inc), and hemophilia treatments Refacto, BeneFIX and Xyntha.
A business combination would also allow the merged companies to slash costs with another round of job cuts in areas with significant overlap, from administration to research to sales.
The deal would be the largest acquisition in the drug industry since Pfizer bought Warner-Lambert Co for US$93.4 billion in 2000, the Journal reported.
Pfizer’s annual sales would rise 46 percent to about US$70 billion. That would help the New York-based company offset some of the US$12 billion in revenue it begins losing in 2011, when Pfizer’s top-selling Lipitor cholesterol pill faces generic competition.
The US$50.19-a-share price values the transaction at US$66.8 billion for Wyeth’s outstanding shares as of Oct. 31. The figure will be slightly higher when Wyeth employee stock options are converted into stock when the transaction is completed.
Investors gave the transaction an early vote of confidence. Pfizer’s shares rose US$0.24, or 1.4 percent, to US$17.45 on Friday when the talks were first reported by the Journal. Wyeth jumped 12.7 percent, or US$4.91, to US$43.74.
The combined company would have 130,000 employees, and its annual revenue would be 55 percent more than the world’s second-biggest drugmaker, London-based GlaxoSmithKline PLC, which has said it will focus on smaller purchases in the year ahead.
A Pfizer-Wyeth agreement would exceed Roche Holding AG’s US$43.7 billion offer for the remainder of Genentech Inc, announced in July.
The Wyeth transaction carries both promise and peril for Pfizer, analysts and investors said in interviews since talks were first reported by the Journal.
It could keep Pfizer’s earnings unchanged at US$2.69 a share from 2010 to 2015, when patents expire on some of Pfizer’s biggest products, said Tim Anderson, an analyst with Sanford C. Bernstein in New York, in a research report. That compares with a 68 percent drop without the acquisition, to US$1.40 in 2015.
To achieve that, Pfizer would need to cut 70 percent of Wyeth’s research, marketing and administrative costs, Anderson said.
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