Pfizer announced on October 12 its acquisition of Bristol, TN-based King Pharmaceuticals, having entered into a "definitive merger agreement," an acquisition that will allow Pfizer, according to Chairman and CEO Jeffrey Kindler, to "offer a fuller spectrum of treatments for patients across the globe who are in need of pain relief and management." Kindler further explained that the $3.6 billion acquisition of King, a diversified pharmaceutical company specializing in discovery and clinical development, would mean "the revenue generated by King's portfolio will further diversify Pfizer's business, while at the same time contributing to steady earnings growth and shareholder value."
Facing patent expiration on the blockbuster drug LIPITOR, Pfizer is seeking ways to increase revenues, decrease costs, and hedge bets, which includes the $110 billion merger with Warner-Lambert in 2000 and the $60 billion acquisition of Pharmacia in 2002. Accordingly, "Brian Markison, Chairman and CEO of King, said that "with Pfizer's commercial, medical and regulatory expertise, global strength in patient services and reimbursement, and global scale and resources, we believe Pfizer can build on our foundation and take our business to the next level."
Pfizer anticipates that this acquisition, with respect to operating expenses, will yield an initial cost savings of approximately $200 million, to be fully realized by the end of 2013.
The acquisition of King is part of Pfizer's broader and ongoing diversification strategy, which has "to date encompassed the multi-billion-dollar acquisition of Wyeth, but also various in-licensing agreements and a concerted movement into the generics market as a means to drive growth in the emerging markets," according to analyst Simon King. The danger in such a strategy, though, is that such rapid growth could lead to an unwieldy organization with complex management, compliance, and reporting issues.
Pharmaceutical consultants agree that companies should do, as Pfizer has in this situation, everything they can to maintain a competitive edge while still ensuring quality. But when pharmaceutical companies swell by mergers and acquisitions, problems arise that can negate the potential benefits. Nigel Smart, Managing Partner of Smart Consulting Group, warns that "growing drug companies will be able to remain competitive, efficient, and compliant only if they "apply the appropriate techniques and methods in a logical and consistent fashion."
