NEW YORK: Pfizer is buying rival drugmaker Wyeth in a $ 68-billion cash-and-stock deal that will increase its revenue by 50 per cent, solidify its No. 1 rank in the troubled industry and transform it from a pure pharmaceutical company into a broadly diversified health care giant.
At the same time, Pfizer announced cost cuts that include slashing more than 8,000 jobs.
The deal comes as Pfizer’s profit takes a brutal hit from a $ 2.3-billion legal settlement over allegations it marketed certain products for indications they have not been approved.
The New York-based company is also cutting 10 per cent of its workforce of 83,400, slashing its dividend, and reducing the number of manufacturing sites.
Early Monday, Pfizer, the maker of cholesterol treatment Lipitor, said it will pay $50.19 per share under for Wyeth, valuing Madison, New Jersey-based Wyeth at a 14.7 per cent premium to the company’s closing price of $ 43.74 on Friday.
Both companies’ boards of directors approved the deal but Wyeth shareholders must do so, antitrust regulators must review the deal and a consortium of banks lending the companies $ 22.5 billion must complete the financing.
Pfizer has been under pressure from Wall Street to make a bold move as it faces what is referred to as a patent cliff in the coming years. As key drugs lose patent protection, they will face generic competition and declining sales. Lipitor is expected to face generic competition starting November 2011. It brings in nearly $ 13 billion a year for the company.
Acquiring Wyeth helps Pfizer diversify and become less-dependent on individual drugs — Lipitor now provides about one-fourth of all Pfizer revenue — while adding strength in biotech drugs, vaccines and consumer products. Wyeth makes the world’s top-selling vaccines, Prevnar for meningitis and pneumococcal disease, and co-markets with Amgen Inc. the world’s No. 1 biotech drug, Enbrel for rheumatoid arthritis.
“The combination of Pfizer and Wyeth provides a powerful opportunity to transform our industry,” Pfizer Chairman and Chief Executive Jeffery B. Kindler said in a statement.
“It will produce the world’s premier biopharmaceutical company whose distinct blend of diversification, flexibility, and scale positions it for success in a dynamic global health care environment.” — AP