Pfizer, Wyeth deal nears

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Pfizer Inc, the world's largest drugmaker, was close to a USD 68 billion purchase of US rival Wyeth in a move to diversify its revenue base, sources familiar with the situation said on Sunday.

The boards of the US rivals were holding separate meetings on Sunday to finalize an agreement and an announcement was seen as imminent, said three sources with direct knowledge of the talks. One source said Pfizer was still finalizing a USD 25 billion financing package to fund the deal.

The deal would help Pfizer cope with a major gap in revenue in 2011 when its blockbuster Lipitor cholesterol treatment will begin to face US generic competition. Next year, Wyeth loses patent protection on its own top drug, the antidepressant Effexor XR.

Still, buying Wyeth would help Pfizer diversify into vaccines and injectable biologic medicines by adding Wyeth's big-selling Prevnar vaccine for childhood infections and Enbrel rheumatoid arthritis treatment. Pfizer would realize major cost savings by streamlining areas that overlap.

Pfizer was expected to pay roughly USD 50.19 per share for Wyeth, sources said. Pfizer would pay USD 33 per share in cash and 0.985 per share of Pfizer stock for each share of Wyeth. The sources were not authorized to talk to the media.

Based on Wyeth's 1.33 billion shares outstanding as of October 31, the deal would be valued at about USD 66.8 billion. Including Wyeth's stock options, the deal would be worth USD 68 billion, sources said.

At USD 50.19 per share, the deal would mark a 15-percent premium over Wyeth's closing stock price of USD 43.74 on Friday. Wyeth's stock surged 12.6 percent on Friday on news of the possible deal.

"I think shareholders would be happy with that," said David Moskowitz, pharmaceuticals analyst with Caris & Co. "I think USD 50 is a good price. I think it's fair for both parties."

A merger of Pfizer and Wyeth could trigger a wave of consolidation in the cash-rich pharmaceutical sector as drug makers look to diversify revenues in the face of competition from generic-drug rivals, analysts said.

"Consolidation is a necessary evil in Big Pharma. This sector must consolidate now and Pfizer is the poster child," Moskowitz said. "The industry cannot sustain the number of players we have in major pharma anymore."

Pfizer Chief Executive Jeff Kindler was expected to head the combined company, sources said. Wyeth Chairman Bernard Poussot was expected to leave after the deal closed, one source said.

Pfizer has struggled after digesting two huge deals in the past decade. Kindler previously has called mega-mergers disruptive and distracting.

Source :Zeenews