Immediate Fallout from the Pfizer-Wyeth Deal
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The ink hasn’t had time to try on the deal sheet and Pfizer already has announced what the impact of its acquisition of Wyeth will have on the combined company. Here’s what to expect: Pfizer will shed at least 19,000 jobs from it newly combined work force of 128,000 employees; it will slash its stock dividend by 50%; and it will take a $2.3 billion charge to settle a federal investigation over off label promotion of its former pain drug Bextra.
The combined company will be run by Pfizer’s CEO, Jeff Kindler, who joined Pfizer in 2006 after serving as legal counsel for McDonald’s. Bernard Poussot who became Wyeth’s CEO a little over a year ago will depart the company. As I mentioned in a post yesterday, Pfizer and Wyeth had been in talks for over a year before the deal was consummated. If the deal had closed last year, Mr. Poussot would have garnered a $38 million dollar severance package that included cash, pension, health benefits and other entitlements. But, because Wyeth’s board changed its compensation package for its CEO on January 1, he will only be entitled to a severance package of only $18.3 million. Not bad for a guy who ran the company for little over a year!
Other fallout from the deal includes: increased consolidation or purchase of cash-poor biotechnology companies—that will result in more layoffs and continue to reduce the life sciences workforce in the US— and the loss of a potential biotech dealmaker (Wyeth) that was aggressively pursuing M&A strategies and licensing opportunities with smaller, struggling biopharmaceutical companies. Most Wall Street analysts agree that the debt taken on by Pfizer to purchase Wyeth will prevent the company from participating in any new major acquisitions in the foreseeable future.
While the deal may ultimately benefit Pfizer, it certainly won’t help to improve the overall, short term health of the pharmaceutical and biotechnology industries.
Until next time…
Good Luck and Good Job Hunting (I hear that they are hiring on the West Coast)
I am sure that most of you have heard by now that it takes about $1.0 billion to shepherd a new drug from discovery through commercialization. It is a nice round number but methinks that “something is rotten in pharma land”. The massive pharma layoffs in 2007 were justified because of nearing patent expiry, encroachment by generic manufacturers, over zealous FDA scrutiny and failing stock prices. To that end, how do you explain this little tidbit about Wyeth that my colleague Ed Silverman at Pharmalot reported on late last week? 
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