London, UK - 29 January, 2009 - Recent talks are about the recession, economic downturn, credit crunch and so on. However, the pharma giant Pfizer made a remarkable start in 2009. Pfizer acquires its rival big pharma company Wyeth for about $68bn for stock and cash. This acquisition is said to be the one of the biggest in the pharmaceutical history. However, would it have been better for Pfizer to have acquired Amgen instead of Wyeth?
Pfizer acquires Wyeth- Behind the Scene:
Pfizer faces tough competition ahead, from generics after the expiry of its block buster drug Lipitor in 2011. Lipitor a cholesterol treatment drug, which generates around $ 13 billion a year, is facing patent expiration in 2011. Pfizer is set to face big challenges by 2012 not only from generics but also from investors because of the decline in R & D productivity. Though its pipeline has 200 products, there are no blockbusters to even the dent of around $30 billion left by the patent expiry of 13 drugs by 2014.
Wyeth is also facing similar challenges from generic drugs for their anti-depressant drug Effexor, which generates around $ 3.92 billion annual revenues. Wyeth was planning to take over Crucell, a Dutch vaccine company. With Pfizer taking over Wyeth, the plans of acquiring Crucell have been dropped. Crucell share price slumped down to 12.60 euros because Wyeth has withdrawn from a possible merger.
The combined pharmaceutical company (Pfizer and Wyeth) will be one of the biggest in history and is expected to maintain top position in the next 5 years. This acquisition will enhance the pipeline products for the therapeutic areas in Alzheimer's disease, auto immune disease, inflammation, oncology, pain and others. Pfizer is expected to become the top player in vaccines, bio-therapeutics, animal health and consumer market. Pfizer will be a unique company with more than 15 products with $1.0 billion each in annual revenue. This strategic move from Pfizer also brings out a new business model, wherein no one product would generate more than 10% of the total company revenues. This is to move away from the dependence on a single blockbuster molecule as was the case with Lipitor (25% of the company revenues were from Lipitor).
Most of the big pharmaceutical companies are facing decline in revenues and earnings in the next 5 years. The merger of Pfizer and Wyeth may be contagious and will trigger some big M&A activity in the pharmaceutical industry in forth coming weeks. The pharmaceutical industry is one of the cash-rich industries and this industry has seen the ravages of the current economic gloom.
Though plagued with R&D challenges, patent expiries, generic competition and high drug attrition rates, pharmaceutical companies have resorted to various crisis management strategies to stay afloat during trying times. One of these strategies is M&A activities. With Pfizer taking a strong and bold step in this direction, there may be other companies to follow.
The list below looks into the current available cash reserves in the industry in 2008.
Pharmaceutical Companies - Cash Available*:
Last updated on: 27/08/2010 11:40:18