Pfizer, the world's biggest drug company, yesterday agreed to purchase the mid-size Pharmacia Corporation for stock valued at $60 billion (€59.65 billion), creating a global pharmaceutical giant with $48 billion in revenue.
Pfizer's share of pharmaceutical sales around the world is expected to rise from 8 per cent to 11 per cent. The deal is the biggest corporate merger in the United States for more than a year and gives Manhattan-based Pfizer full rights to the arthritis drug Celebrex, one of the most popular treatments on the world market, which the two companies had been marketing together.
With the pharmaceutical industry going through troubled times, investors gave the takeover a cool reception. Pfizer stock fell by more than $4 to $28 in heavy trading on the New York Stock Exchange although Pharmacia rose sharply by over $6 to $39.
The mammoth deal was approved by the boards of both companies on Sunday and announced yesterday. There are expected to be layoffs among the joint workforce of 150,000.
Analysts said it would hasten further consolidation in the industry, where Bristol-Myers Squibb and Merck have been suffering from the end of patent protection for some of their best-selling drugs.
Pharmacia gives Pfizer a best-selling drug for the years ahead and a highly regarded research facility. It is now set to become the leading drug-maker in the European market as well as in Japan and South America.
The next biggest company, GlaxoSmithKline, controls 7.3 per cent of the world market.
The deal has to be approved by regulators in the US and Europe and is likely to be subject to intensive scrutiny. Though rising to 11 per cent in world sales, Pfizer may overcome anti-monopoly regulations as the two companies have few overlapping products.
However, questions may arise over similar drugs that both Pfizer and Pharmacia are planning to launch to combat urinary incontinence. Pfizer's Darifenacin will be submitted for approval this year and would have encountered competition from Pharmacia's Detrol.
Pfizer already produces the popular Viagra drug for enhanced male sexual performance, the anti-depressant drug Zoloft and the cholesterol-lowering drug Liptor.
The deal surprised observers on Wall Street who have seen several big mergers like AOL-Time Warner go wrong. There is also intense pressure from governments around the world for lower drug prices. This has forced down the stock price of pharmaceutical companies to their lowest levels in years.
Under terms of the deal, Pharmacia will spin off its remaining 84 per cent ownership of Monsanto to its shareholders, who will then receive 1.4 shares of Pfizer stock for each share of Pharmacia.
Pharmacia stock will be valued at $45.08 per share, 36 per cent higher than Friday's closing price.
Pfizer-Pharmacia expects to spend $5.2 billion on research and development of new drugs, 20 per cent more than GlaxoSmithKline.
