Diabolic Digest
Pfizer
buys Pharmacia
By Khaled Diab
The
world's largest pharmaceuticals firm, Pfizer, has agreed to acquire rival US
drug company Pharmacia for a reported 52.5 billion euro in stock, raising
speculation that the fragmented industry will be seized by merger-mania as
other companies try to survive tough competition and the slowing pace of
innovation.
Pfizer said the merger was aimed at consolidating its global market lead,
reducing costs, boosting its research capability, stimulating growth and
diversifying its portfolio.
The new company will have a combined R&D budget of 7 billion euro in 2002,
and annual revenues of more than 48 billion euro.
"This is an extraordinary opportunity to combine two of the
fastest-growing and most innovative pharmaceutical companies and to position
Pfizer for sustained long-term leadership of the global pharmaceutical
industry," said Hank McKinnell, chairman and chief executive officer of
the company which makes anti-impotence drug Viagra.
The Pharmacia deal gives the drugs giant ownership of the anti-arthritis
treatment Celebrex, which McKinnell hopes will help Pfizer gain pole position
in Europe, Japan and Latin America.
However, in a late twist, the European Medicines Evaluation Agency (EMEA) has
been asked by French health authorities to re-examine claims that Celebrex
causes less intestinal side effects than cheaper anti-inflammatory drugs. This
follows recent evidence that Celebrex and similar drugs may be linked to an
increased risk of heart attacks.
The EMEA was expected to announce the safety review today (25 July) and can
withdraw the drug if it finds the risk of taking it is greater than any
benefit. This could seriously affect the success of the merger.
The deal had already met with mixed reactions from analysts. Some view the merger
as a welcome step in a fragmented industry dogged by intensifying competition
from generic firms, political pressures to produce low-cost drugs and
lengthening product development cycles.
Others suggest the new giant will start a merger bubble in the industry as
other firms play catch-up.
The financial world reacted to news of the mega-deal by pushing Pfizer shares
down by 20% to a four-year low.
This article first appeared in the 25-31 July
2002 edition of the European Voice.
© Copyright 2002 The Economist Newspaper Limited. All rights reserved.
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