Pfizer Troops Back Into Consumer Products

by Les Luchter, Jan 26, 2009, 4:06 PM

• Comment
• Recommend (1)
• Tweet
• 

Pfizer's $68 billion purchase of Wyeth, announced Monday, brings the pharmaceutical giant back into the consumer products/OTC market it abandoned just three years ago when it sold its health-care product portfolio (including Listerine, Purell, Rogaine and Sudafed) to Johnson & Johnson.

Now, Pfizer will return to the health care game as it acquires such brands as Centrum, Advil, Robitussin and Chapstick from Wyeth--which, until 2002, had spent 76 years known as American Home Products.

The timing is crucial, of course, as Pfizer's current top brand by far--Lipitor--loses its patent protection in 2011, and Viagra's patent in 2012. Wyeth's own two largest pharmaceutical brands, Effexor and Protonix, are also due to lose their patents during the next couple of years. On top of that, as noted by Icarus Consultants' Sally Church in her Pharma Strategy Blog: "Congress is looking to curb DTC (direct to consumer) advertising" for prescription drugs. Indeed, during a press conference Monday morning, Pfizer Chairman and CEO Jeff Kindler insisted that the acquisition was being made to turn Pfizer into a more diversified health care company and that it was "not about cost-cutting."

Based on previous announcements of layoffs in combination with the two companies' promising a 15% reduction in their combined workforce on Monday, Medical Marketing & Media and others pointed out that some 20,000 jobs could be lost in total.

Pfizer also said it would close five of its 46 plants and save $4 billion in the third year after the deal closes by cutting "selling, informational and administrative functions, research and development and manufacturing." One analyst--Tim Anderson of Sanford C. Bernstein--said in a note to investors reported by several major media that in order to meet its goals, Pfizer would need to cut 70% of Wyeth's $10 billion in research, marketing and administrative costs.

Could the impact from job losses and plant closings be offset by the deal's significance to the U.S. economic climate in general--which has not seen any other major mergers since the economic crisis deepened several months ago? Responding to criticism about banks using federal bailout money to help finance the deal, Kindler declared: "It's good to see banks doing what banks are supposed to be doing"--namely, lending money. Financial analysts, meanwhile, were pondering whether more M&A deals would be in the works, involving such firms as Schering Plough, Bristol-Myers Squibb, Amgen and others.

The Pfizer-Wyeth deal, which coincided with Pfizer's reporting a 90% decline in fourth-quarter net income to $266 million and Wyeth a 7% decrease to $5.3 billion, is not expected to close until late Q3 or early Q4. According to Reuters, it represents the third-largest pharma deal in history, behind Pfizer's own 2000 acquisition of Warner-Lambert and Glaxo Wellcome's purchase of SmithKline in the same year.

Much of Pfizer's huge fourth-quarter decline was attributed to a $2.3 billion settlement of a five-year-old federal case alleging it had marketed anti-inflammatory drug Bextra and other products for "off-label" purposes, including the use of advertising images and language.

• Comment
• Recommend (1)
• Tweet
• 

Be the first to comment on "Pfizer Troops Back Into Consumer Products "

Leave a Comment