Pharmaceutical Executive Digest Europe - March 18, 2009 - (Page 4) Megamergers Then, on January 26, came the potentially transformational event: Kindler announced that Pfizer was acquiring Wyeth Pharmaceuticals for $68.103 billion. News of the deal — the third largest in pharma history — generated immediate reaction from Wall Street to Washington. The headlines tell the tale: “Not What the Doctor Ordered” in the Washington Post. “Did Pfizer Just Commit Suicide?” on MotleyFool.com. “Is Jeffrey Kindler Brave or Crazy?” on the Harvard Business School website. Not all were nasty. Analysts who had long promoted a major merger as Pfizer’s only option — the firm had more than $27 billion in cash on its balance sheet at year’s end — grudgingly approved. “Pfizer is in the most desperate state of anyone in the industry in terms of patent expirations,” says Standard & Poor’s analyst Herman Saftlas. “We feel that it is in the best interests of Pfizer to do a deal like this in order to shore up the top line.” And at least the price is right. All companies are selling at prices lower than usual, and Wyeth is no exception, says Chuck Farkas, head of healthcare for Bain & Company. “The 30% premium is below where Wyeth traded in ’06 and ’07,” he says. Pfizer plans to bankroll the deal with $22.5 billion in cash, $22.5 billion in debt and $23 billion in stock. To help pay for it, Pfizer’s quarterly dividend of 7% will be cut in half, a move that has already sparked shareholder venom. “Many are likely to sell, but that might be a good thing,” says Peter Young, president of Young & Partners. “Pfizer would prefer to have new stockholders who invest because they have faith in the new company.” At the moment, such faith requires a willing suspension of disbelief in pharma megamergers. Will They or Won’t They? After news of the merger broke, CEOs of rival firms were asked if a large M&A is in their cards. Chris Viehbacher, CEO of SanofiAventis, Feb. 11: “I am not very hot for big deals, but you can never say never.” Daniel Vasella, CEO of Novartis, Jan. 30: “I don’t anticipate a transformational transaction. Our strategy is to look at smaller acquisitions that fit our existing business.” Severin Schwan, CEO of Roche, Feb. 4: “We are not interested in megamergers. We want to continue with smaller and medium-sized acquisitions.” David Brennan, CEO of AstraZeneca, Jan. 29: “Our acquisition strategy is unchanged. We don’t need a big merger to cut costs and realize efficiencies.” John Lechleiter, CEO of Eli Lilly, Jan. 29: “We do not believe these large combinations have sustained value. Consolidation is obviously happening. If we see a small or mid-cap opportunity, we’ll go for it.” Andrew Witty, CEO of GlaxoSmith-Kline, Feb. 5: “There is no way we will be distracted by large-scale M&A going on in the sector You will see us make acquisitions— small- to medium-sized, not a megamerger.” James Cornelius, CEO of BristolMyers Squibb, Jan. 27: “We’re in shopping mode, we’re in strategy mode. We’re becoming leaner, more agile and better able to execute our strategy.” Pole position paranoia Still, megamergers are what got Pfizer to its number one position in the first place. The Warner-Lambert deal for $90 billion in 2000, followed in 2003 by the $60 billion Pharmacia purchase, are both generally viewed as textbook examples of how to destroy shareholder value. In what insiders call a “loot and scoot,” Pfizer grabbed a single outstanding product that was the goal of the purchase — Lipitor and Celebrex, respectively — and essentially ditched the rest of the company. Most notably, Pfizer axed almost all of Pharmacia’s oncology pipeline, including longstanding R&D operations at the former Upjohn and Parke-Davis sites Sources: Bloomberg; Reuters; The New York Times; The Wall Street Journal; SeekingAlpha.com 1 NEWS 2 FROM THE EDITOR / NEWS 3 MEGAMERGERS 7 NEW SALES MODELS 10 UK NEWS 12 CALENDAR 13 ON THE MOVE CLICK TO SUBSCRIBE TO PHARM EXEC http://www.youngandpartners.com/html/different.html http://www.motleyfool.com http://harvardbusiness.org/?cm_mmc=google-_-iBrand+-+Harvard+Business-_-harvard+business-_-Broad%7C-%7C100000000000000007867&cm_guid=1-_-100000000000000007867-_-3022502355 http://harvardbusiness.org/?cm_mmc=google-_-iBrand+-+Harvard+Business-_-harvard+business-_-Broad%7C-%7C100000000000000007867&cm_guid=1-_-100000000000000007867-_-3022502355 http://www2.standardandpoors.com/portal/site/sp/en/us/page.siteselection/site_selection/0,0,0,0,0,0,0,0,0,0,0,0,0,0,0,0.html http://www.bain.com http://www.bain.com http://www.SeekingAlpha.com http://www.pharmexeceurope.com/europharmexec/newsletter/subscribeNewsletter.jsp
Table of Contents Feed for the Digital Edition of Pharmaceutical Executive Digest Europe - March 18, 2009 Pharmaceutical Executive Digest Europe - March 18, 2009 Contents From the Editor Pfizer-Wyeth Sales News Calendar On the Move Pharmaceutical Executive Digest Europe - March 18, 2009 Pharmaceutical Executive Digest Europe - March 18, 2009 - Contents (Page 1) Pharmaceutical Executive Digest Europe - March 18, 2009 - From the Editor (Page 2) Pharmaceutical Executive Digest Europe - March 18, 2009 - Pfizer-Wyeth (Page 3) Pharmaceutical Executive Digest Europe - March 18, 2009 - Pfizer-Wyeth (Page 4) Pharmaceutical Executive Digest Europe - March 18, 2009 - Pfizer-Wyeth (Page 5) Pharmaceutical Executive Digest Europe - March 18, 2009 - Pfizer-Wyeth (Page 6) Pharmaceutical Executive Digest Europe - March 18, 2009 - Sales (Page 7) Pharmaceutical Executive Digest Europe - March 18, 2009 - Sales (Page 8) Pharmaceutical Executive Digest Europe - March 18, 2009 - Sales (Page 9) Pharmaceutical Executive Digest Europe - March 18, 2009 - News (Page 10) Pharmaceutical Executive Digest Europe - March 18, 2009 - News (Page 11) Pharmaceutical Executive Digest Europe - March 18, 2009 - Calendar (Page 12) Pharmaceutical Executive Digest Europe - March 18, 2009 - On the Move (Page 13)
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