ROBERT SIEGEL, host:
This is All Things Considered from NPR News. I'm Robert Siegel.
MICHELE NORRIS, host:
And I'm Michele Norris. In the midst of the recession, there is a mega-deal to report today. The largest drug maker in the world, Pfizer, has agreed to buy a smaller rival, Wyeth. The price tag - $68 billion in cash and stock.
There aren't many companies lining up that kind of money these days. The patent on Pfizer's cholesterol drug, Lipitor, runs out in two-and-a-half years, and that may be one reason Pfizer is so eager to gobble up Wyeth. NPR's Yuki Noguchi reports.
(Soundbite of Liptor ad)
Dr. ROBERT JARVIK (Scientist, Researcher and Entrepreneur): I've studied the human heart for a lifetime...
YUKI NOGUCHI: In the pharmaceutical industry, you always need geese laying a steady supply of golden eggs in the form of lucrative drugs that treat common problems like arthritis, obesity, or high cholesterol.
(Soundbite of Lipitor ad)
Dr. JARVIK: And Lipitor is clinically proven to reduce your risk of heart attack.
NOGUCHI: Lipitor has been Pfizer's big golden goose. The drug came to market in 1997, then Pfizer bought the company that developed it, and now it makes up a quarter of Pfizer's total sales. The problem for Pfizer is that there's no heir apparent when the Lipitor patent expires. And chief executive Jeffrey Kindler said that's part of what's driving this deal.
(Soundbite of press conference)
Mr. JEFFREY KINDLER (Chairman and Chief Executive Officer, Pfizer): Investors have rightfully been concerned about the clarity of what happens when Lipitor goes off patent. I have no doubt that's weighed on the stock price. Today's announcement definitively addresses that issue that has been on shareholders' minds.
Mr. IRA LOSS (Senior Health-Care Analyst, Washington Analysis Corporation): Well, it's necessary. I'm not so sure it's smart.
NOGUCHI: That's Ira Loss, senior health-care analyst with Washington Analysis Corporation, a research firm. He says the pharmaceutical industry in general has had trouble developing a pipeline of new promising drugs, including Wyeth.
Mr. LOSS: Development of these things takes a lot longer than initially anticipated in almost every case.
NOGUCHI: And merging won't necessarily solve both companies' problems. Pfizer had to pull tests on a cholesterol drug in development, and its profits plummeted last quarter as it settled litigation related to marketing of its pain drug, Bextra.
But Wyeth has drugs to treat arthritis and vaccines to prevent meningitis. And Wyeth also has a consumer products business with brands such as Advil and ChapStick. Pfizer just exited that business two years ago when it sold its consumer products division to Johnson & Johnson. That, Ira Loss says, proved to be a mistake because even in bad times, consumers buy those products.
Daniel Ruppar is a pharmaceutical analyst for Frost & Sullivan, a research firm. He says business-wise, the merger makes sense which is why Pfizer got a hard-won loan to complete the deal. Ruppar also says this deal may spur a fresh round of drug company mergers following the last wave nearly a decade ago, and that could spell major changes for the industry.
Mr. DANIEL RUPPAR (Pharmaceutical Analyst, Frost & Sullivan): So you have to ask that question - is what's good for their business good for the drug development industry over all?
NOGUCHI: Ruppar says likely not. He says creating bigger pharmaceutical giants could make it harder for smaller companies to get support to develop newer drugs, and less diversity and development could mean fewer new breakthroughs in the future.
Both Pfizer and Wyeth dispute that. They say by combining, they'll be able to bring new drugs to market faster while saving money on overhead. The deal is expected to close later this year. Yuki Noguchi, NPR News.