NEW YORK/LONDON – Pfizer Inc (PFE.N), the world's largest drugmaker by revenue, is in talks to acquire rival Wyeth (WYE.N) in a deal that could be valued at more than $60 billion, according to the Wall Street Journal.
The report sent shares in Wyeth (WYE.F) 13.5 percent higher in Frankfurt trade on Friday - their highest since August 2007 - while Pfizer (PFE.F) fell 2.6 percent.
The newspaper, citing people familiar with the matter, said on its website that the two sides had been in discussions for months and a deal was not imminent.
The talks are fragile given recent market volatility and weak global economic conditions and could collapse, it added.
Industry experts said a big acquisition by Pfizer would not be a surprise, given the huge loss of earnings it faces with the expected arrival of generic versions of its flagship cholesterol drug Lipitor in 2011.
"Pfizer, more than anyone else in the pharmaceutical industry, is under pressure because of Lipitor coming off patent," said Chris Sterling, European head of chemicals and pharmaceuticals at KPMG in London.
Recent stock market turmoil has made assets attractively priced for cash-rich drugmakers, prompting a number of recent deals.
GlaxoSmithKline (GSK.L) agreed on Friday to buy Belgian group UCB's (UCB.BR) emerging markets operations for 515 million euros ($667 million).
Wyeth itself has also been in talks to buy Dutch vaccine firm Crucell (CRCL.AS) - a deal that might now be in doubt, sending Crucell shares tumbling 17 percent on Friday.
But arguably nobody needs to move as much as Pfizer.
"They've got a massive patent hole to plug and they need to start working on it right now, so there is pressure on them to do something big," one banker in London told Reuters.
"The question has been whether it would be Wyeth or Amgen (AMGN.O) or Bristol-Myers (BMY.N)."
Pfizer spokesman Raymond Kerins told Reuters the company does not comment on "market rumors or speculation," while Wyeth could not be immediately reached for comment.
A Wyeth spokesman was quoted in the Journal as saying the company did not comment on "marketplace rumor."
The Journal said Pfizer would likely use a combination of cash and stock to acquire Wyeth. Details on pricing have not been worked out, it said.
The paper said with Wyeth's market capitalization at about $52 billion and takeover premiums in the sector averaging at more than 20 percent, the deal would be over $60 billion.
Based on Thursday's closing share price of $17.21, Pfizer was valued at nearly $118 billion.
Pfizer became the world's largest drugmaker with its purchase in 2000 of Warner-Lambert Corp and the $60 billion acquisition three years later of Pharmacia Corp.
COST SAVINGS
Huge cost savings from the two deals, and outright ownership of cholesterol drug Lipitor from the Warner-Lambert deal, initially made Pfizer one of the best-performing of the world's large drugmakers.
More recently its performance has flagged and its shares dropped to more than 10-year lows in late 2008, after merger-related 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 full-year 2008 revenue to be roughly similar to its 2007 revenue of $48 billion.
But it expects 2008 earnings to show respectable growth thanks to continuing layoffs globally which are expected to help produce $2 billion in cost savings by year-end, compared with the end of 2006.
Pfizer's biggest challenge is looming loss of patent protection on Lipitor, a $12 billion-a-year blockbuster.
The company's third-quarter pharmaceutical revenue fell 1 percent to $11 billion and would have fallen 6 percent if not for favorable foreign exchange factors.
Sales of Lipitor are already on the wane, slipping 1 percent in the quarter, due to stiff competition from the likes of AstraZeneca Plc's (AZN.L) Crestor.
And Pfizer's new drug to help smokers quit, a blockbuster hope called Chantix, has lost a fourth of its sales in recent months due to safety concerns.
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