Big Pharma’s Musical Chairs
The biggest deal of the past month--and what will perhaps prove to be the biggest deal of the year--came just a little too late for inclusion in last month’s issue. Pfizer‘s proposed acquisition of Wyeth represents not just the merger of two major pharmas, but what is really a massive biotech deal--a way for Pfizer to leapfrog ahead in a biologics race where it has traditionally been the laggard. Wyeth dived into biotech early, when most major drug companies underestimated its potential and viewed the industry as a source of a few niche products to license on attractive terms. But Wyeth--then American Home Products--acquired Genetics Institute way back in the hazy days of 1992. In 1994 it made a major expansion into vaccines through the acquisition of American Cyanamid, its subsidiary Lederle, and its majority ownership in Immunex. The blockbuster arthritis drug Enbrel that Immunex went on to produce continues to be one of Wyeth’s biggest revenue drivers to this day.
Of course, Wyeth also has conventional pharmaceuticals--the antidepressant Effexor is its top-selling products. But it is also facing a lot of the same patent expiration and pipeline productivity problems plaguing other major pharma companies.
Whether this turns out to be a good deal or not depends a lot on Wy-Pfi’s next move. Using Wyeth as a platform for further biotech acquisitions could start a real shift at the world’s largest drug company. Using it as a pipeline to raid and a way to gain further scale will be, well, just another mega-pharma deal that postpones the inevitable day of reckoning.
In the wake of the deal, Merck has said it isn’t ruling out a major acquisition of its own. GlaxoSmithKline, on the other hand, has said its fine just the way it is, thank you. It is still focused on internal reinvention...and massive downsizing--layoffs of 6,000 to 10,000 have made a lot of headlines and drawn more attention to Andrew Witty’s plans for reinvention at GSK.
Interestingly, Proctor & Gamble has announced it’s getting out the pharmaceutical business altogether. If Pfizer decides it wants to shed Wyeth’s consumer products division during the course of consolidation, perhaps it can work out a swap deal with P&G.
--Karl Thiel
