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| Pfizer acquires Wyeth for $68bn | Pfizer acquires Wyeth for $68bn |
| (about 3 hours later) | |
| US drugmaker Pfizer is to buy rival Wyeth in a deal worth $68bn (£50bn), the two companies have announced. | US drugmaker Pfizer is to buy rival Wyeth in a deal worth $68bn (£50bn), the two companies have announced. |
| The merger will allow Pfizer to protect itself from a drop in revenues when its popular drug Lipitor and other products lose patent protection. | The merger will allow Pfizer to protect itself from a drop in revenues when its popular drug Lipitor and other products lose patent protection. |
| It will also help Pfizer diversify its product portfolio, thanks to Wyeth's presence in biotech drugs and vaccines. | It will also help Pfizer diversify its product portfolio, thanks to Wyeth's presence in biotech drugs and vaccines. |
| Pfizer also announced plans to cut 10% of its global workforce, or 8,000 jobs, and shut some manufacturing sites. | Pfizer also announced plans to cut 10% of its global workforce, or 8,000 jobs, and shut some manufacturing sites. |
| Deals of this quality and this magnitude will rekindle enthusiasm and hope about equity markets Andre Bakhos, Princeton Financial Group | Deals of this quality and this magnitude will rekindle enthusiasm and hope about equity markets Andre Bakhos, Princeton Financial Group |
| It also reported a 90% drop in profit to $268m in fourth quarter because of a $2.3bn legal settlement. | It also reported a 90% drop in profit to $268m in fourth quarter because of a $2.3bn legal settlement. |
| Excluding the charge, its profit rose to 65 cents per share from 40 cents per share a year earlier. | Excluding the charge, its profit rose to 65 cents per share from 40 cents per share a year earlier. |
| Combined business | Combined business |
| Pfizer, the world's biggest drugs firm, also makes Viagra, while Wyeth produces antidepressant Effexor XR. | Pfizer, the world's biggest drugs firm, also makes Viagra, while Wyeth produces antidepressant Effexor XR. |
| RIVAL DRUGMAKERS Pfizer: World's largest pharmaceutical firmMakes Lipitor and ViagraProfit dropped 90% to $268m in fourth quarter on huge legal chargesPlans to cut 10% of its workforce and shut manufacturing sites Wyeth: One of the largest drugmakersStrong in vaccines and biotechnologyMakes Effexor XR and PrevnarWill report its fourth-quarter results on 29 January | RIVAL DRUGMAKERS Pfizer: World's largest pharmaceutical firmMakes Lipitor and ViagraProfit dropped 90% to $268m in fourth quarter on huge legal chargesPlans to cut 10% of its workforce and shut manufacturing sites Wyeth: One of the largest drugmakersStrong in vaccines and biotechnologyMakes Effexor XR and PrevnarWill report its fourth-quarter results on 29 January |
| Pfizer has raised $22.5bn from banks to finance the deal and said it would reduce dividends "in connection with the proposed transaction between Pfizer and Wyeth". | Pfizer has raised $22.5bn 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. | "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. | "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 $93.4bn in 2000. | 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 $93.4bn in 2000. |
| Three years later, Pfizer also bought Pharmacia for $60bn. | Three years later, Pfizer also bought Pharmacia for $60bn. |
| Earlier on Monday, it was reported that Wyeth had withdrawn from talks to acquire Dutch biotechnology firm Crucell. | Earlier on Monday, it was reported that Wyeth had withdrawn from talks to acquire Dutch biotechnology firm Crucell. |
| Diversification and cost-cutting | Diversification and cost-cutting |
| From 2011, Pfizer is expected to lose billions of dollars in sales to cheaper rival generics of its cholesterol treatment Lipitor. | From 2011, Pfizer is expected to lose billions of dollars in sales to cheaper rival generics of its cholesterol treatment Lipitor. |
| GLOBAL JOB CUTS Caterpillar - 20,000ING - 7,000Philips - 6,000Corus - 3,500Home Depot - 7,000Pfizer - 8,000 plusGeneral Motors - 2,000 | |
| Wyeth faces the same problem next year, as it will lose patent protection on its best-selling Effexor XR. | Wyeth faces the same problem next year, as it will lose patent protection on its best-selling Effexor XR. |
| Wyeth also makes the popular Prevnar vaccine against childhood infections and rheumatoid arthritis treatment Enbrel. | Wyeth also makes the popular Prevnar vaccine against childhood infections and rheumatoid arthritis treatment Enbrel. |
| The deal will also allow the two companies to cut cost by cutting jobs in overlapping areas. | The deal will also allow the two companies to cut cost by cutting jobs in overlapping areas. |
| "Deals of this quality and this magnitude will rekindle enthusiasm and hope about equity markets," said Andre Bakhos, Princeton Financial Group president. | "Deals of this quality and this magnitude will rekindle enthusiasm and hope about equity markets," said Andre Bakhos, Princeton Financial Group president. |
| "In the midst of a global recession, here is Pfizer, hopefully spending their dollars wisely." | "In the midst of a global recession, here is Pfizer, hopefully spending their dollars wisely." |
| Drug spending is also expected to come under pressure as governments attempt to reduce the cost of medical care. | Drug spending is also expected to come under pressure as governments attempt to reduce the cost of medical care. |
| Consolidation | Consolidation |
| Analysts disagreed on whether the deal might lead to other mergers in the sector. | Analysts disagreed on whether the deal might lead to other mergers in the sector. |
| "I wouldn't extrapolate this deal and say we're going to see a lot more deals because it's still a difficult financing environment," said Peter Boockvar, equity strategist at Miller Tabak & Co. | "I wouldn't extrapolate this deal and say we're going to see a lot more deals because it's still a difficult financing environment," said Peter Boockvar, equity strategist at Miller Tabak & Co. |
| But pharmaceutical analyst David Moskowitz at Caris & Co said: "Consolidation is a necessary evil in Big Pharma. This sector must consolidate now, and Pfizer is the poster child." | But pharmaceutical analyst David Moskowitz at Caris & Co said: "Consolidation is a necessary evil in Big Pharma. This sector must consolidate now, and Pfizer is the poster child." |