CHEMICAL & ENGINEERING
NEWS OF THE WEEK JULY 22, 2002 - EDITED BY JANICE LONG & JANET S. DODD
BUSINESS
PFIZER CAPTURES PHARMACIA Creation of industry giant is expected to spur more consolidation
P
FIZER WILL ACQUIRE PHAR-
macia in a deal announced at $60 billion.The acquisition, expected to be completed before year's end, will create the drug industry's largest company with $48 billion in annual revenues and more than $7 billion in R&D spending. It will have a market share of about 11%, according to IMS Health, placing it well ahead of its nearest competitors. "It is increasingly cosdy to fund the high-risk and long-term research required to develop pharmaceutical products," Pfizer Chairman and CEO Henry A. McKinnell Jr. says in explaining the move. 'At the same time, payers and providers want high value and affordable medicines. "With Pharmacia, we will have the products, pipeline, scale, and financial flexibility to extend our leadership," he continues. Over the next few years, Pfizer anticipates annual growth of 11% in revenues and 14% in net income, excluding merger costs. Pfizer clearly has raised the competitive stakes and thus the possibility ofanotherwave ofconsolidation. "The new Pfizer will break away from the pack, with most ofthe rest ofthe top 10 having market shares less than halfits size," says Denise Anderson of the investment bankJulius Baer. Number-two-ranked GlaxoSmithKline, with a 7% market share, is expected to come under pressure to find a partner. Both it and Novartis are rumored to be HTTP://PUBS.ACS.ORG/CEN
looking, especially after Novartis took a 21% stake in Roche last year. Likely targets include the troubled Bristol-Myers Squibb, and smaller operations such as Bayer's drug unit and France's MUTUAL ADVANTAGE McKinnell (left) and Hassan Sanofi-Synthelabo. Although Pharmacia ranks both see positives from their deal. among the top 10, it's been hard for smallerfirmslike it to compete. ing COX-2 inhibiting anti-in"We simply did not have sufficient flammatory, with sales of over $3 resources to fully leverage the billion. The twofirmsalready cogrowth of our current products market Celebrex and have even while at the same time funding the agreed that, in the unlikely event development ofour pipeline," says anotherfirmsteps in and acquires Chairman and CEO Fred Hassan. Pharmacia, decision-making on He will serve as Pfizer vice chair- the COX-2 portfolio would revert to Pfizer. man for at least a year. And, like the Warner-Lambert The combined companies will have 120 new compounds in de- purchase, which will yield $1.8 velopment and plan onfiling20 billion in cost savings this year, new-drug applications over five the new deal is expected to genyears. They have largely comple- erate significant savings—$2.5 mentary product and patent billion by 2005. Decisions have portfolios, and thus anticipate not yet been made on employee and spending cuts. few antitrust concerns. Before it can complete the deal, PFIZER AND Pfizer was involved in the last consolidation wave with its hostile Pharmacia will spin off its 84% PHARMACIA $115 billion takeover of Warner- stake in its Monsanto agricultur- AT A GLANCE Lambert in 2000. Pharmacia ac- al products business to share- Headquarters: quired Monsanto, and Glaxo holders onAug. 13. Monsanto will New York City Wellcome joined with Smith- take with it liability that may arise Sales: $47.9 billion Kline Beecham around that time. from its former chemicals unit So- R&D spending: $7.5 billion Just a few years before, mergers lutia related to PCB contamina- Net income: $9.8 billion created AstraZeneca, Novartis, tion (C&EN, March 4, page 12). Employees: 135,000 Aventis, and Pharmacia itself. Although fluctuating stock Major products: At least 12 Pfizer's pursuit of Warner- prices have altered the value ofthe products with annual revLambert was motivated by a ma- deal since it was announced onju- enues over $1 billion each, jor product— the cholesterol-low- ly 15, Pfizer will exchange 1.4 of including Celebrex, Lipitor, ering drug Lipitor, which now has its shares for each Pharmacia Norvasc, Zoloft, Zithromax, annual sales of more than $7 bil- share. Its original offer was a 44% Neurontin, and Zyrtec. lion. With the purchase of Phar- premium over Pharmacia's recent NOTE: Combined financial data estimates for 2002, excluding macia comes Celebrex— the lead- average stock price.—ANN THAYER are one-time items and merger costs. C & E N / JULY 2 2 , 2 0 0 2
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