Stocks rose in part on the news of
Pfizer Inc.'s $68 billion acquisition of rival Wyeth, which could prompt further consolidation in healthcare. While the synergistic deal would provide Pfizer with a broader range of products and
help make up for the loss of patent protection for its cash cow cholesterol drug Lipitor in 2011, there are a number of risks involved.
New York's Pfizer also announced in a
guidance report that -- separately from the deal -- it was initiating a cost-cutting plan that included $3 billion in yearly savings, a 10% reduction in its 80,000-plus work force, a reduction in manufacturing space and other measures.
Of the Wyeth acquisition, Pfizer, which may face a
Moody's Investors Service downgrade, said it expects to achieve synergies of about $4 billion by the end of 2012. A New York Times report
called the plan ambitious, saying "Pfizer would need to cut an eye-popping 70 percent of Wyeth's research, marketing and administrative costs to get to the $4 billion figure it has announced." The article said the risk is that, by cutting too much from Wyeth's research budget, Pfizer could be setting the combined company up for problems down the road.
On the other hand, one analyst told The Telegraph that
Pfizer is not thinking radically enough, saying now the pharmaceuticals industry is all about developing relationships with generic operators, expanding exposure in emerging markets (the Wyeth deal actually helps on that front) and being more creative about what the structure of a future company will look like. Wyeth also has some
legal trouble, with thousands of women claiming two of its hormone replacement drugs caused cancer and heart disease.
There's also the
problem of size, as explained by our editor in chief, who noted it becomes ever harder to generate growth when the size gets so large, and it takes radical cutting of the kind no pharma has really undergone (though it's much discussed) to slim down by selling assets. -
Baz HiralalSee the joint announcement on the Wyeth-Pfizer dealSee Pfizer's 2008 results and 2009 guidanceGo to the NYT storyPfizer, Wyeth and the problem of size
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Juergen Lasowski
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