By Ransdell Pierson and Jessica Hall
NEW YORK/PHILADELPHIA (Reuters) - PFIZER (PFE.NY)Inc
The Wall Street Journal reported late on Friday that Pfizer would pay $50 per share for Wyeth, or between $65 billion and $70 billion, for the company.
Such an acquisition, which a source said could come soon, would help Pfizer cope with a major gap in revenue in 2011 when its blockbuster Lipitor cholesterol treatment will begin to face U.S. generic competition.
It would diversify Pfizer into vaccines and injectable biologic medicines by adding Wyeth's big-selling Prevnar vaccine for childhood infections and Enbrel rheumatoid arthritis treatment. Pfizer would realize major cost savings by streamlining areas that overlap.
But the deal also raises questions about whether another huge acquisition is the right medicine for Pfizer, which has struggled after digesting two huge deals in the past decade. And it threatens to spark another round of layoffs in the drug industry at a time the U.S. economy is already on its knees.
"I think it's eminently doable," said Barbara Ryan, an analyst with Deutsche Bank. "The question is whether others enter the fray. It's going to come down to price. The deal is attractive at this price, it's not attractive at any price."
Ryan said Pfizer could pursue Bristol-Myers Squibb
Pfizer and Wyeth have been in talks for months, but Pfizer may have difficulty getting funding for a deal because of tight credit markets, sources said.
Talks were accelerating on Friday and a deal could be announced in the near term, one source said, while cautioning that negotiations could still fall apart. A deal could be reached by early next week, the Journal reported.
Pfizer would pay two-thirds of the cost in cash and a third in stock for Madison, New Jersey-based Wyeth, the paper said.
New York-based Pfizer had $26 billion in cash and cash equivalents and short-term investments on its balance sheet, as of its latest quarterly filing. It had $16.3 billion in short-term borrowings and long-term debt.
Spokesmen for Pfizer and Wyeth declined to comment.
Wyeth shares closed up $4.91, or 12.6 percent, at $43.74 on the New York Stock Exchange. Pfizer rose 24 cents, or 1.4 percent, to close at $17.45.
Wyeth has been in talks to buy Dutch vaccine firm Crucell
But sources told Reuters the Pfizer-Wyeth talks will not necessarily scuttle Wyeth's Crucell deal.
ANOTHER DEAL FOR PFIZER?
Pfizer became the world's largest drugmaker with its purchase in 2000 of Warner-Lambert and the $60 billion acquisition three years later of Pharmacia.
The question for investors, many of whom continue to hold the stock largely because of its industry-topping dividend, is whether another acquisition of that scale will revive Pfizer over the long term, or only temporarily boost results.
Ultimately, a huge acquisition could make it harder for the merged company to grow from its larger revenue base and to prevent bureaucracy from stifling innovation.
Pfizer exemplifies the overriding problem for many large drugmakers, which have struggled to produce new blockbusters to replace those on which they lose exclusivity.
"We have, for many quarters now, said that Pfizer essentially has no realistic way of replacing the many drugs that are scheduled to go generic apart from doing a mega-merger," Sanford C. Bernstein analyst Tim Anderson said in a research note.
The global economic downturn has created a buyer's market for cash-rich drugmakers, prompting several deals.
Wyeth's market capitalization as of Thursday was about $52 billion, so at $60 billion, the deal would represent a 15 percent premium. Pfizer was valued at about $118 billion.
COST SAVINGS
Aside from Enbrel, for which Wyeth shares rights with Amgen, and Prevnar, Wyeth also is developing experimental Alzheimer's disease drugs, which could be a major opportunity although some believe such drugs are a longshot.
Pfizer would also gain Wyeth's large consumer health division that includes Advil painkillers more than two years after it sold off its own consumer health business to Johnson & Johnson
Pfizer's fortunes rose initially after its Warner-Lambert and Pharmacia deals thanks to huge merger-related cost savings, and outright ownership of Lipitor from Warner-Lambert.
Recently its performance flagged and shares dropped to more than 10-year lows in late 2008, after savings dried up and its $7 billion-a-year research budget failed to bear much fruit.
Pfizer, which reports fourth-quarter earnings next week, has said it expects 2008 revenue to be roughly similar to its 2007 revenue of $48 billion. It expects decent profit growth thanks to deep cost cuts.
