Tuesday, July 16, 2002

Pfizer merger could force consolidations

Others may be pressed to keep up

By Theresa Agovino
The Associated Press

        NEW YORK — Pfizer Inc. added to its formidable strengths as the pharmaceutical industry's leader with a $60 billion acquisition of Pharmacia Corp. Monday, pressuring its competitors toward similar mergers at a time of slimmer profits and angry consumers.

        The all-stock deal will create a pharmaceutical powerhouse with more than $48 billion in revenues and a research budget of more than $7 billion. Pfizer is already the world's largest drug company when measured by the overall value of its stock.

        The merger combined Pfizer's widely recognized prowess for marketing with Pharmacia's drugs in the areas of oncology and ophthalmology, where Pfizer does not have a strong presence.

        The companies said the merger should provide $2.5 billion in cost savings by 2005, a particularly important point at a time when drug companies are finding it harder to produce new blockbuster medicines and

        are under growing public and government pressure to hold down prices.

        “That this brings cost savings is obvious,” Pfizer chief executive Henry McKinnell said. “But it creates a company that can grow more than the two companies could separately. It also significantly eliminates risk by expanding the product and market areas of the company.”

        Pfizer manufactures blockbusters such as cholesterol-lowering agent Lipitor and erectile dysfunction drug Viagra, while Pharmacia makes the cancer drug Camptosar as well as Rogaine hair products and the Nicorette smoking cessation line.

        The companies already jointly market pain reliever Celebrex and its successor drug, Bextra. The two drugs have already been out pacing new prescriptions of the competing product Vioxx, made by Merck & Co.

        The deal spells even more trouble for Merck, which has said its 2002 earnings will be flat because of patent expirations and slowing Vioxx sales.

        Merck has said it wants to remain independent, but analysts said in this environment it may not have a choice.


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- Pfizer merger could force consolidations