Pfizer completes Wyeth acquisition; may reduce research budget

Pfizer announced that it completed its $68-billion acquisition of Wyeth. Martin Mackay, president of Pfizer Global Research and Development, stated Thursday that the combined company is likely to cut its research budget. Mackay declined to specify by how much the drugmaker may trim its R&D spending, but indicated that the merged company will focus on cancer, neurological disorders, pain, diabetes, heart and circulatory diseases, infectious diseases, antibacterials, and vaccines.

The combined company is expected to review projects in the next six weeks, remarked David Roblin, head of research and site director for Pfizer’s European R&D headquarters. Deutsche Bank's Barbara Ryan suggested Pfizer may try to keep research spending to $8 billion, 30 percent less than the total both companies spent in 2008.

Meanwhile, Kenneth Kaitin, director of the Tufts Center for the Study of Drug Development, stated that while the purchase of Wyeth may help Pfizer offset some of the loss of revenue from Lipitor when the drug loses patent protection, the cuts to its research budget may challenge the company's long-term growth. "This is just a delaying tactic, it doesn’t increase output in terms of research. This is a survival technique for big pharma," commented Kaitin.

Mackay and Mikael Dolsten, former president of Wyeth research, are expected to share responsibilities for R&D at the combined entity, with Dolsten overseeing development of biotechnology projects and Mackay leading traditional research into chemicals. Mackay indicated that collaborations with external partners are expected to continue following the merger, noting that "I don’t think we’re going to aim for the Pfizer culture or the Wyeth culture or any legacy company. To make this work in this two-division model with Mikael and I running it, collaboration is going to be at the forefront."

Mackay had recently noted that Pfizer was close to meeting its target of having between 24 and 28 products in late-stage testing by the end of the year, including a potential oral treatment for rheumatoid arthritis that Cowen & Co.'s Craig Gordon has forecast could generate sales of $1.5 billion a year, if approved.

Joint operations are expected to commence on October 16, with Wyeth functioning as a wholly owned subsidiary of Pfizer. Wyeth shares will stop being traded on Thursday and each outstanding share of the drugmaker will be converted into $33 in cash plus 0.985 of a Pfizer share.

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