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Pfizer/Pharmacia mega-merger gains final clearance

Published on 29/10/03 at 10:40am

The creation of a new pharmaceutical goliath is now just days away after Pfizer and Pharmacia received final regulatory clearance for their merger.

Pfizer has reached agreement with the US Federal Trade Commission on which products it must divest before it acquires Pharmacia for $53 billion in the coming days. The company has declined to say what the products are, simply adding that they already have buyers and are "not material" to the company's business.

Once completed, the merger will make Pfizer, already the world largest pharma company, nearly 50% bigger than its nearest rival, GlaxoSmithKline, with a combined market capitalisation currently totalling around $245 billion.

Pfizer and GSK currently both have about a 7% share of the world-wide prescription drug market but once merged, Pfizer market share will rise to 11%.

Consultants Wood Mackenzie estimate the new Pfizer will be the leader in the cardiovascular, CNS and genito-urinary therapy areas, and second in infection and musculoskeletal.

US clearance has taken a month longer than anticipated, and follows the delayed approval of the deal from the European Commission, begun in late 2002.

Commission concerns about potential monopolies in certain markets means Pfizer has sold its phase III incontinence drug Enablex (darifenacin) to Novartis for $225 million, while retaining Pharmacia's established overactive bladder treatment Detrusitol (Detrol in the US).

Pfizer is expected to seek approval for an incontinence indication for Detrol, which last year had sales of $757 million.

Datamonitor analysts said: "Detrol has short-term blockbuster potential, while darifenacin may not offer significant advantages over Detrol or Johnson & Johnson's Ditropan, limiting its market penetration."

The EC also ruled that two Pharmacia erectile dysfunction products currently in development, PNU-14277E and an apomorphine nasal spray (developed in collaboration with Nastech), would also have to be sold to meet anti-competition requirements.

Commission concerns about the companiespotential erectile dysfunction franchise was the chief reason for its "serious doubts" about the merger, delaying a decision by two months.

Its judgement was made more difficult by confusion surrounding the status of Viagra European patent after it was overturned following a legal challenge by Lilly and ICOS, who have just launched their rival drug Cialis.

Levitra, a third drug in Viagra PDE-5 inhibitor class, has now also been launched by Bayer and its marketing partner GlaxoSmithKline.

Pfizer will also sell off Ketensin, an antihypertensive marketed in the Netherlands, and Parkemoxin, an animal antibiotic marketed in Germany. The two products have combined annual sales of about $2.5 million.

In an unrelated sale, Northern Ireland based Galen is to buy Pfizer oral contraceptives Estrostep and Loestrin and its hormone replacement therapy femhrt for $359 million. Pfizer will also receive residual payments for Estrostep and femhrt of $125 million.

Pfizer acquired the products through its merger in 2000 with Warner-Lambert. Sales of the products totalled $211 million in 2002. The transaction still requires approval from regulators and Galen shareholders.

The companies will shortly reveal its taff review,which will inevitably see thousands of redundancies in sites across the globe as the companies maximise savings from economies of scale.

The future of Pharmacia's UK headquarters in High Wycombe, and its clinical trials centre opened just a year ago, will be in the balance, with the merged company almost certain to be run from Pfizer new headquarters in Walton Oaks, Surrey.

The company's top management is also likely to be dominated by Pfizer executives, led by existing Chief Executive Hank McKinnell. Pharmacia current Chief Executive, Fred Hassan, is tipped to take over as head of Schering-Plough.

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