Pfizer Inc, the No 1 drug maker, was close to a $68-billion purchase of United States rival Wyeth in a move to diversify its revenue base, sources familiar with the situation said.
The boards of the US rivals held separate meetings on Sunday to finalise an agreement and an announcement was seen as imminent, said three sources with direct knowledge of the talks.
One source said Pfizer was still finalising a $25-billion financing package to fund the deal.
Wyeth shares rose 10,6 percent to €36,35 in Frankfurt early on Monday. Pfizer shares fell 1,0 percent to €13,00.
Wyeth had been in talks to buy Dutch vaccine firm Crucell, which said on Monday that Wyeth had withdrawn from the discussions. Crucell shares plummeted 21,1 percent to €12,23.
The deal would help Pfizer cope with a major gap in revenue in 2011, when its blockbuster Lipitor cholesterol treatment will begin to face US generic competition. Next year Wyeth loses patent protection on its own top drug, the antidepressant Effexor XR.
Still, buying Wyeth would help Pfizer diversify into vaccines and injectable biologic medicines by adding Wyeth’s big-selling Prevnar vaccine for childhood infections and Enbrel rheumatoid arthritis treatment. Pfizer would realise major cost savings by streamlining areas that overlap.
Pfizer was expected to pay about $50,19 a share for Wyeth, sources said. Pfizer would pay $33 a share in cash and 0,985 per share of Pfizer stock for each share of Wyeth. The sources were not authorised to talk to the media.
Based on Wyeth’s 1,33-billion shares outstanding as of October 31, the deal would be valued at about $66,8-billion. Including Wyeth’s stock options, the deal would be worth $68-billion, sources said.
At $50,19 a share, the deal would mark a 15-percent premium over Wyeth’s closing stock price of $43,74 on Friday. Wyeth’s stock had surged 12,6 percent on Friday on news of the possible deal.
Consolidation wave?
Pfizer typifies many large drug makers, which have struggled to produce new blockbusters to replace those on which they lose exclusivity.
A merger of Pfizer and Wyeth could trigger a wave of consolidation in the cash-rich pharmaceutical sector as drug makers look to diversify revenues in the face of competition from generic-drug rivals, analysts said.
”The outlook for the industry has steadily waned, (with) industry P/E multiples declining under the combined onslaught of price pressure, aggressive generic competition and low R&D productivity,” Deutsche Bank analysts said in a note.
”The result is that many leading companies face a decline in revenues and earnings next decade, as profitable products reach the end of their patented lives and are not replaced by new drugs,” the analysts said, adding that AstraZeneca could be a target, though there were also reasons it might not happen.
Pfizer chief executive Jeff Kindler was expected to head the combined company, sources said. Wyeth chairperson Bernard Poussot was expected to leave after the deal closed, one source said. – Reuters