Pfizer to buy Wyeth for $68 billion

Pfizer Inc, the No. 1 drugmaker, said on Monday that it would acquire U.S. rival Wyeth for about $68 billion in a move to diversify its revenue base.

New York-based Pfizer, already the world's leading drugmaker, becomes even larger following the cash-and-stock deal with Wyeth, based in Madison, N.J.

The deal values Wyeth shares at $50.19 each, a nearly 15% premium to Friday's closing price. Pfizer agreed to pay $33 in cash and 0.985 share in Pfizer stock for each Wyeth share.

Pfizer said the deal would be financed through a combination of cash, debt and stock. The company said it is borrowing $22.5 billion from a consortium of banks.

The deal helps Pfizer cope with a major gap in revenue in 2011, when its blockbuster Lipitor cholesterol treatment will begin to face U.S. generic competition. Next year, Wyeth loses patent protection on its own top drug, the anti-depressant Effexor XR.

Still, the deal would help Pfizer diversify into vaccines and injectable biologic medicines by adding Wyeth's big-selling Prevnar vaccine for childhood infections and Enbrel rheumatoid arthritis treatment. Pfizer would also realize major cost savings by streamlining areas that overlap.

The board of directors also decided to cut Pfizer's quarterly dividend in half to 16 cents a share.

Pfizer announced that it would ramp up its focus in treatments for Alzheimer's disease, inflammation, cancer, pain and psychosis, and continue to focus on vaccines and biotechnology.

"The new company will be an industry leader in human, animal and consumer health," said Pfizer chief executive Jeffrey Kindler, in a press release. "Its geographic presence in most of the world's developed and developing countries will be unrivaled."

Pfizer also reported a slight decline in fourth-quarter revenue to $12.9 billion, from $12.3 billion the year before.

Miller Tabak analyst Les Funtleyder, author of "Healthcare Investing," said that a Pfizer-Wyeth merger could lead to more job cuts, especially considering Pfizer's plan to reduce costs by $4 billion. Pfizer recently announced that it was cutting up to 8% of its research staff, or up to 800 jobs.

Funtleyder said that Wyeth has a "decent pipeline" but with "nothing that immediately jumps out at me as blockbuster." Most promising, he said, is Wyeth's plan to roll out a new form of Prevnar, which combats meningitis and blood infections, with sales totaling $2.1 billion in 2008.

One of Pfizer's chief challenges is finding a replacement for the cholesterol-cutting Lipitor, the top-selling drug of all time. The drug's annual sales peaked at nearly $13 billion in 2006, but revenue will plummet when Lipitor's patent expires in 2011.