THE ACQUISITION OF WYETH BY PFIZER CLAIRE CHOU

THE ACQUISITION OF WYETH BY PFIZER CLAIRE CHOU 102933021 WESLEY WANG 102933023 JENNIFER CHEN 102933024 TAYLOR SCOBBIE 102933037

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

TRANSACTION FUNDING Sources Debt $ 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

STOCK PRICES BEFORE THE MERGER $50. 19 29% premium

Ø Love and other drugs_clip 1. mp 4 Ø Lover and other drugs_clip 2. mp 4

Ø 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 patentprotected products. - Lipitor patent expiring in 2011. $12 bn/year revenue. - Viagra’s patent expiring from 2010 -2013. $5 bn/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

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Our Question Do you think it was a good acquisition for Pfizer? On Oct. 15, 2009 Pfizer acquired Wyeth for $ 68 bn.