Pfizer-Wyeth talks could stir restive rivals

NEW YORK Sat Jan 24, 2009 2:11am GMT

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NEW YORK (Reuters) - News that Pfizer Inc (PFE.N) is in talks to acquire Wyeth WYE.N for more than $60 billion may flush out other bidders for the U.S. drugmaker and trigger a long-predicted consolidation in the pharmaceutical industry.

With its lucrative vaccine business and biotechnology drugs not facing imminent patent expirations, Wyeth has become a target for companies bracing for generic competition for their most important drugs while struggling with development pipelines that have recently yielded few major new medicines.

"All the pharma companies are desperate, so it's possible someone else comes in here," said Jon LeCroy, an analyst with Natixis Bleichroeder.

"It's probably more likely that we see some of the other companies get bidders, and Bristol is the name that's being thrown around," LeCroy said of Bristol-Myers Squibb Co (BMY.N), which several analysts suggested as a potential takeover target.

Schering-Plough Corp SGP.N , which has limited exposure to generics between 2011 and 2013 when many drugmakers lose patent protection on their biggest medicines, is also often mentioned as an attractive acquisition candidate.

Credit Suisse analyst Catherine Arnold, in a research note said: "A Pfizer/Wyeth deal may mark the beginning of a year of sector consolidation and could trigger other pharma-pharma or pharma-biotech deals.

"Other companies that we think may have an interest in Wyeth include Novartis (NOVN.VX), Merck (MRK.N) and Sanofi-Aventis (SASY.PA)."

New Jersey-based Wyeth faces its own patent crisis in 2010, when its Effexor XR anti-depressant loses protection. Moreover, its ulcer drug Protonix unexpectedly was hit by generic competition a year ago, and the company suffered delays or rejections for a number of its experimental medicines.

But Wyeth has much to offer and may not simply be Pfizer's for the taking despite the New York-based company's position as the world's largest drugmaker.

"Pfizer can't come in like a white knight and pick them off on the cheap," Morningstar analyst Damien Conover said. "I think they'd (Wyeth) do it at the right price, but I don't think they'd sell at a cheap premium.

"From Wyeth's perspective, they have a strong pipeline of experimental drugs, and more importantly, a robust lineup of marketed biologics, with Enbrel and Prevnar," Conover said, referring to the company's rheumatoid arthritis drug and childhood vaccine that are both blockbusters.

Wyeth shareholders are likely to embrace a deal, whether from Pfizer or another bidder.

"Our sense is that some Wyeth shareholders have been waiting for the day when Wyeth would get acquired," Sanford Bernstein analyst Tim Anderson said in a note to clients.

"This suggests that even without Wyeth's consent Pfizer ... could likely find a receptive shareholder base."

Natixis' LeCroy agreed that the deal would be a boon to Wyeth shareholders. Wyeth shares, which closed on Thursday at $38.83 before news of talks broke, have traded in the past year as low as $28.07. They rose 12.64 percent to close at $43.74 on Friday after the news broke.

"If Pfizer does end up bidding for them, (Wyeth shares) will be significantly higher than where the stock has traded recently," he said.

The losers from such a deal and industry consolidation, however, are sure to be many of Wyeth's 47,500 employees and quite possibly the struggling U.S. economy.

"They'll slash Wyeth to the bone," LeCroy said of Pfizer's likely cost-cutting strategy post acquisition.

"It's bad for the industry and the economy as a whole because we're going to see massive amounts of job losses in the pharmaceutical industry," LeCroy said.

"We've already seen a lot and it's only going to increase as these mergers start happening, so in a way that ends up being bad for everyone."

(Additional reporting by Lewis Krauskopf, editing by Leslie Gevirtz)

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