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Tuesday, October 20, 2020  Spokane, Washington  Est. May 19, 1883
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Pfizer to buy rival Wyeth, cut 10 percent of workers

By LINDA A. JOHNSON Associated Press

TRENTON, N.J. – No. 1 drugmaker Pfizer Inc. said Monday it is buying No. 12 Wyeth for $68 billion in a deal that ultimately will wipe out nearly 20,000 jobs but quickly boost Pfizer’s revenue and profit and transform it overnight into a medicine cabinet for all.

New York-based Pfizer managed with one stroke to overshadow a full house of problems, some of which would have pummeled its stock: a 90 percent drop in income, hefty costs of settling government charges of wrongdoing, a severe cut in its dividend, a shockingly low profit forecast for 2009 and 8,000 job cuts starting immediately.

That’s all on top of the colossal problem triggering this deal: the expected loss of $13 billion a year in revenue for cholesterol fighter Lipitor starting in November 2011, when it gets generic competition.

By buying Wyeth, Pfizer will mutate from a maker of blockbuster pills to a one-stop shop for vaccines, biotech drugs, traditional pills and nonprescription products for both people and animals.

Pfizer also said it would cut about 8,000 jobs, 10 percent of its work force, as part of what it expects will be a staff reduction totaling 15 percent of the combined companies’ workers – implying a total job loss of almost 20,000.

The cash-and-stock deal, one of the industry’s biggest ever, is expected to close late in the third quarter or in the fourth quarter. It comes as Pfizer’s 2007 fourth-quarter profit takes a brutal hit from a $2.3 billion legal settlement over allegations it marketed pain reliever Bextra and possibly other products for indications that had not been approved.

“In one single transaction, the combination with Wyeth advances every single one of (our) strategies,” Pfizer chief executive Jeff Kindler told reporters during a news conference.

Those goals include increasing sales in emerging markets, enhancing the ability to treat specific diseases, such as Alzheimer’s, and becoming a top player in vaccines and biologic drugs, which are made from living cells.

Pfizer, the maker of impotence pill Viagra and Detrol for overactive bladder, said it will pay $50.19 per share for Madison, N.J.-based Wyeth, a 14.7 percent premium to the company’s closing price of $43.74 Friday.

From the first quarter through 2011, Pfizer will cut 10 percent of its current work force of 81,900.

The company, long under pressure from big investors to make a bold move, said it expects eventually to cut the companies’ combined work force, now 129,000 people, by 15 percent. That includes the Pfizer cuts announced Monday, which will hit most departments, from administration and sales to manufacturing and research.

Wyeth, which sells Centrum vitamins, antidepressant Effexor and biotech arthritis and psoriasis treatment Enbrel, said there’s been no decision on job cuts among its staff due to the acquisition.

Both companies already have been cutting staff and other costs, as have most in the industry ahead of a wave of patent expirations worth far more than the new drugs coming on the market.

Pfizer said the new cost-cutting program will reduce spending by about $3 billion, $1 billion of which will be reinvested in the business. That’s on top of an existing cost-cutting program that has produced about $2.8 billion in annual savings, compared with 2006 levels.

Analysts were split on how good the deal is but saw no benefit for consumers.

“This deal doesn’t bring Pfizer the cure for Lipitor” revenue losses, but it brings short- and long-term cost savings, said Erik Gordon, biomedical analyst and professor at University of Michigan’s Ross School of Business. “It increases Pfizer’s research capabilities in biologics and it’s good for Wyeth because Wyeth will now be able to tap into Pfizer’s marketing machine.”

Analyst Steve Brozak of WBB Securities said it still doesn’t solve Pfizer’s long-term problem of not having enough promising drugs in its pipeline.

“The question becomes what are they going to do to fill that research gap,” Brozak said.

Acquiring Wyeth helps Pfizer diversify and become less-dependent on individual drugs – Lipitor now provides about one-fourth of all Pfizer revenue – while adding Wyeth’s strengths in developing and manufacturing vaccines and biologic drugs.

Wyeth co-markets with Amgen Inc. the world’s No. 1 biotech drug, Enbrel, and makes the world’s top-selling vaccine, Prevnar, for pneumococcal bacteria that can cause painful ear infections and life-threatening meningitis and blood infections.

Together, the two companies will have 17 products with annual sales of $1 billion or more, including Prevnar, Effexor, Detrol, Lyrica for fibromyalgia and nerve pain, and blood pressure drug Norvasc.

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