Pfizer's acquisition of Pharmacia for nearly $60 billion in stock has created the largest pharmaceutical company in the world with annual revenues of $48 billion. This acquisition comes at a time when the pharmaceuticals and biotech companies are under increased scrutiny and are facing unprecedented challenges. The general public is clamoring for reduced drug prices, and the general malaise affecting corporate America has sparked a closer watch from regulatory authorities. On the other hand, most major pharmaceutical companies have become saddled with declining research productivity, directly affecting their product pipeline. With the patent expiry of several, billion dollar blockbusters looming large, companies are increasingly desperate to meet the impending shortfall in revenues due to the generic invasion.
From the long-term strategic point of view, this deal makes sense. The greatest gain for Pfizer would probably be in anti-cancer therapeutics, where it has a minimal presence. Pharmacia's colorectal cancer product Camptosar, has been one of the few success stories in the oncology area in the past few years. This product was the cornerstone of the oncology franchise, with expanded indications expected in lung cancer and other solid tumors. There are other promising anti-cancer products in phase III trials. The combined Pfizer-Pharmacia new product pipeline would have almost 200 candidates, with an annual R & D spending to the tune of $7 billion.
This acquisition has also changed the competitive landscape of the industry, with Pfizer becoming the largest pharmaceutical company in the world. Recently, most of the attention was centered on the possibility of Bristol-Myers Squibb, being a take-over candidate for a larger pharmaceutical company, with GlaxoSmithKline (GSK) being in the forefront. This new scenario, places renewed pressure on GSK, the erstwhile number one, to catch-up with Pfizer with an acquisition of it's own.
Lastly, Fred Hassan, the Chairman/CEO of Pharmacia and Vice-Chairman and Director in the newly formed Pfizer, is renowned for the successful implementation of mergers and acquisitions. His last merger of Pharmacia and Upjohn with Monsanto to create Pharmacia Corporation was smooth and completed in record time. Hence, Pfizer has gained access to an individual known for his expertise in ensuring a smooth transformation.
Pfizer's acquisition of Pharmacia has set the pace and it's now time for the industry to catch up.
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