Pfizer-Wyeth merger speculation fuels debate

An investor note by Credit Suisse analyst Catherine Arnold, arguing that a takeover by global behemoth Pfizer of drug major Wyeth would be "a fitting" partnership, has provoked widespread debate about the direction of both USA-based firms. In particular, a sharp fall, 27% from a late-June high, in Wyeth's share price in the wake of Food and Drug Administration rejections for two of its products, menopause drug Pristiq (desvenlafaxine), a serotonin-norepinephrine reuptake inhibitor (SNRI), and schizophrenia therapy bifeprunox, has led Ms Arnold to view the firm as vulnerable.

The attraction for Pfizer of a merger, supporters claim, would be Wyeth's biotechnology drugs. The precedent of Anglo-Swedish drug major AstraZeneca's $15.0 billion takeover of US large molecule specialist MedImmune is referred to. Significantly, from a regulatory point of view, analysts note that there is relatively little product overlap between Pfizer and Wyeth, especially since the patent expiry of the former's antidepressant Zoloft (sertraline). This would make antitrust concerns less likely to delay or block any deal.

However, critics of the notion of a Pfizer/Wyeth merger note that the global giant has enough problems restructuring itself, without taking on the latter's issues. These include a potentially expensive law suit concerning Wyeth's diet drug and hormone therapy sector. In addition, any advantages to Pfizer would be offset by two major patent expiries for Wyeth products by 2011.