With the clock ticking down on its Lipitor patent, Pfizer is under pressure for the next big thing. With that in mind, talk that German drugs and chemicals group Bayer could be in its sights is not hard to swallow. Shares of Bayer, a $57 billion company, rose nearly 4 percent on the talk. It has a healthy pipeline of new drugs and an attractive over-the-counter medicines business, but it also has agro-chem and plastics businesses it might have to shed to make itself more Pfizer friendly.
In 2000, Pfizer bought Warner Lambert, picking up sole possession of Lipitor, but also acquiring Dentyne chewing gum, Schick razors and an assortment of other non-Pfizery concerns that they were forced to keep for two years as part of that deal, and – Lipitor aside – Pfizer’s share price has hardly been a stellar performer since it paid $90 billion for Warner Lambert. It’s lost half its value since a near-$39 peak in February 2004, so Pfizer shareholders focused on the next big thing could also be a bit wary of taking on a big takeover.
Bayer is a top player in insecticides, fungicides and herbicides. There are companies with the cash and interest to take on Bayer’s agro and other non-drugs chemical revenues – the businesses earned more than $20 billion in ’07. Such companies – BASF comes to mind – would probably face anti-trust issues in acquiring these businesses from Bayer, but what’s a good strategic merger strategy without anti-trust issues.