All that glitters ISN'T gold - Pfizer buys Wyeth

The writing's been on the wall for some time now. It doesn't take a rocket scientist to figure out that if your revenue growth is shrinking (alarmingly), then the best fixit strategy is to go out and buy a competitor - finance the deal through your investment bank buddies on Wall Street, and then add the revenues together and chop the employee strength in the name of cost 'efficiencies'.

Bloomberg has the details of the acquisition(http://bloomberg.com/apps/news?pid=20601087&sid=aBY36rmTcqOk&refer=home), but I do recall a feature on CNN, oh about a year and a half ago where a number of people question the wisdom behind a Pfizer-Wyeth merger.

Here's the link to the article:

http://money.cnn.com/2007/08/24/magazines/fortune/simons_pharma.fortune/index.htm

In summary, its not to going to solve the basic problems faing the drug industry. Wyeth has a troubled pipeline - so there's some common ground already. Wyeth also has some of its bestsellers (depression / heartburn) coming off patent in the 2010 - 2011 window.

So what's the logic? 'Rightsizing'?

Or plain and simple - run out of ideas...

Time will tell, but big mergers are fraught with BIG PROBLEMS - and its difficult to integrate two large companies in any industry. Whether its a good decision to not stick to your core business, accelerate the development of your potential bestsellers in the pipeline - and go after the competion (dog eat dog) remains to be seen.

Where will the 'growth' come from once the dust settles and the cost savings / earnings additions are all realized?

That's the trillion dollar question.

I'm not holding my breath.

Are you?

- oRiOn