THE ACQUISITION OF WYETH BY PFIZER

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FINANCIAL TERMS

Pfizer acquired Wyeth for $ 68 bn.

Purchase Price

• Acquire all outstanding Wyeth common shares• Valuted at $50.19 per share

Cash /Share Mix

• $33 per share in cash• Value of $17.19 per share in equity

Ownership• Pfizer shareholders will own approximately

84% of the stock in the combined company

Funding • Combination of cash, debt, and equity

SourcesDebt $ 22.5 Billion

Cash 22.5 Billion

Pfizer Stock 23.0 Billion

Total $ 68.0 Billion

Commitment from syndicate of banks for debt financing :

Goldman Sachs JPMorgan Barclays Citigroup

Bank of America Merrill Lynch

TRANSACTION FUNDING

STOCK PRICES BEFORE THE MERGER

29% premiu

m$50.19

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Lover and other drugs_clip 2.mp4

Wyeth Origin.pdf

PFIZER’S ACQUISITION MOTIVATIONS

- Largest acquisition since the 2008 financial crisis. Why risk it?

- Pfizer’s massive success due largely to two patent-protected products.

- Lipitor patent expiring in 2011. $12bn/year revenue.

- Viagra’s patent expiring from 2010-2013. $5bn/year revenue.

- Effects of this massive (20%) revenue loss?

ACQUISITION MOTIVATIONS CONTINUED

- Pfizer’s blockbuster drugs now a threat to their balance sheet and common stock price.

- How to compensate? R&D for new products? Increased marketing for existing products?

- Management realized that reliance on sales of a single product might actually be a weakness.

- Solution must diversify portfolio and play to Pfizer’s strengths.

UPCOMING PATENT EXPIRATIONS

Lipitor: patent expired 2011

Lyrica: patent expiring 2013

Celebrex: patent expiring 2014

WHY WYETH – HORIZONTAL BOUNDARIES- Pfizer’s product portfolio is almost completely

traditional pharmaceutical products.

- Wyeth specializes in high-margin biologics, nutraceuticals, and vaccines.

- Very little overlap between their respective portfolios.

- Difficulty in reproducing a biologics manufacturing process means patent expiration isn’t a significant problem.

Before the merger After the merger

ECONOMIES OF SCOPE / MARKETING ELASTICITY- Wyeth’s products can be sold through Pfizer’s

excellent pre-existing sales and marketing infrastructure.

- Industry Analyst “For example, Lipitor, had it been in the hands of Warner-Lambert, would have probably been a $5 billion product. With Pfizer, it was $13 billion. I think they’ll do the same thing with Wyeth products.”

- Pfizer’s brand increases the marketing elasticity of Wyeth’s products.

DISCUSS QUESTION

Based on the information we presented so far, do you think it was a good acquisition for Pfizer?

CONCLUSION

CONCLUSION

unit: USD million

CONCLUSION

Thanks!

Our Question

Do you think it was a good acquisition for Pfizer?

On Oct. 15, 2009 Pfizer acquired Wyeth for $ 68 bn.