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

Pfizer continues with its downsizing

The bad news coming out of Pfizer just keeps coming. Not a particularly good time to be a scientist, after having invested in so many years of study and research...

Or a medical rep.

Or a pharma CEO.

The healthcare industry is running out of promising careers at this rate. Which is a shame, because they have been one of the highest net job creators for a long, long time.

AP reports a fresh round of job cuts, this time affecting scientists in its 'non-core' areas. The company had earlier announced it would now focus on 6 disease states - Alzheimer's, cancer, schizophrenia, pain, inflammation and diabetes and abandon all other research areas.

One of the areas abandoned is cardiovascular diseases - Lipitor, Pfizer's 13 Billion USD bestseller has already seen revenues dip and it remains to be seen whether Pfizer can somehow fill a gaping hole in its revenues which will start to kick in well before 2011, when Lipitor comes off patent.

Jeff Kindler, their CEO has already gone out on a limb by stating that he is looking for acquisitions which will impact earnings positively, but given Roche's Genentech bid setting a trend in the new year, such acquisitions will not come cheap - recession or not.

Research areas that Pfizer is exiting include anemia, bone health, gastrointestinal disorders, obesity, liver disease, osteoarthritis and peripheral artery disease -

Read the complete story here: http://www.washingtonpost.com/wp-dyn/content/article/2009/01/13/AR2009011301300.html

- oRiOn

Foot in Mouth (Disease)?

Jeff Kindler, CEO, Pfizer went on record in a recent interview with FT, claiming that Pfizer is "willing to acquire" a large pharmaceutical firm in order to "improve its financial health." Kindler adds that "the real goal is to grow revenues...We are open to opportunities and constantly looking at those which are big, small and in-between."

Now, if I were holding any Pfizer stock (which I don't), I'd probably be questioning Pfizer's take-no-prisoners strategy. If you can't beat 'em, acquire them.

Kinda reminiscent of a certain company in Redmond, WA...

- oRiOn

Pfizer's Woes Highlighted

Derek Lowe, in a November post on his blog about pharma pipelines - (http://pipeline.corante.com/archives/2008/11/03/pfizer_strategy_layoffs_and_money.php) highlights a statement made by Jeff Kindler, Pfizer's CEO in an interview with FT.

'We're facing a very significant loss of exclusivity in Lipitor at the end of 2011. We have a clear plan for positioning the company for strong, profitable growth after that. That plan consists of pursuing significant new opportunities for increased revenues starting with our internal pipeline, getting further growth out of our existing products, growing in the emerging markets, growing our business on off-patent products. We sell billions of dollars of off-patent products and in many parts of the world that's the most important opportunity to meet unmet medical needs and looking for other potential sources of revenues.'

Judge for yourself - but it isn't exactly the kind of comment which would inspire confidence in the investor community. Pfizer's stock hasn't exactly been a shining star in recent times - and its obvious from some of the comments to Derek's post that folks out there are very sceptical about Pfizer's ability to generate profits from 'internal pipelines' or generics, where they face stiff competition from low-cost manufacturers.

And of course, the layoffs continue at Pfizer... despite statements to the contrary issued by official sources in the know, the fact that the severance-package program (due to expire end 2008) has been extended to mid-2009. All of this on top of the 10,000 job cuts and plant closures announced in Jan 2007 (http://www.fiercebiotech.com/story/pfizer-cuts-10000-jobs/2007-01-22). There's been a lot of chatter on pharma blogs about this, especially on Pharmalot - but its clear that these are trying times indeed for Pfizer, once the darling of investors.

-oRiOn