The merger, announced on Tuesday, will cost Pfizer $3.6 billion.
Pfizer and King Pharmaceuticals announced on Tuesday they have entered into a definitive friendly merger agreement. Under the terms, Pfizer will acquire King, a diversified specialty pharmaceutical company based in Tennessee, for $3.6 billion in cash, or $14.25 per share. The company emphasized the deal is not dilutive of earnings and will not affect its forecast estimates on market performance for the full year.
King, a mid-sized player in the industry, has been a suspected acquisition target for Big Pharma for some time, given its concentrated franchise in the lucrative therapeutics for pain market.
- The deal indicates Pfizer will remain a key player in primary care, with a new emphasis beyond the statin franchise that drove the business over the past decade. King’s inventory of small molecule drugs will prove useful in keeping Pfizer active in high volume businesses linked to prevalent chronic diseases. It will thus augment the company’s recent entry through Wyeth into high-cost specialty biologics.
- King will also cement Pfizer’s effort to become the therapy lead in pain management, building on the existing Celebrex and Lyrica franchises. The expectation is that patients will continue to pay a premium for pain relief, particularly for the explosion in arthritis predicted as the baby boom population ages.
- King’s expertise in new delivery technologies will also help other Pfizer products find new markets and seed introduction of process improvements “beyond the pill.”
On the down side, more staff restructurings—and a $200 million anticipated cost savings—will follow the acquisition and likely trigger additional efforts to review the status of under-performing segments of the overall business, such as oncology. Diversification is clearly the Pfizer strategy—but even for a behemoth like Pfizer it could be too much of a good thing. Look for some winnowing down of asset categories in the early part of next year.