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April 08, 2005

Pfizer to buy Merck?

Both are the giants of the pharmaceutical industry - and both are settled with huge problems.

Generic drugs eating into their market share and Pfizer worries will only increase with more patents to expire next year.

Good old Forbes writes: "But Vioxx is gone, and Zocor loses patent protection next year, probably driving sales of $5 billion to almost nothing. Pfizer's hypertension drug Norvasc loses patent protection around the same time." Shares are falling but still the company is worth a solid US$1198 billion.

Merck was a lot in the news recently - they also faced challenges with the looming patent expiration for Zocor and the withdrawal of Vioxx and as a consequence, their shares also fall - and suddenly, they are only worth US$75 billion in market capitalization.

Not affordable to me or you, but to giants like Pfizer, even if they would need to launch a hostile takeover bid.

So some are now thinking that it is good to combine businesses. Shareholder's saliver drops and they drool over potential gains.

Sorry, but for me, the calculation is that it is a minus plus minus and that doesn't add up to plus, this time.

Employees would surely lose out, once again.

Would it help the drug pipeline? Not necessarily, since big companies look for big gains to satisfy shareholders. Something that is small in revenues might be big for upcoming biotech companies but of no interest at all for giants. To put it plainly: something that brings in revenues of US$50 million or US$100 million might look big to you and me, but is peanuts to a Pfizer or Merck.

Just generally - why do companies see a need to merger when they cannot see growth in the market anymore (I am talking about big mergers, not small ones)? Or when they face problems? A merger is buying market share, but it doesn't make you stronger, if executed wrongly. A company that faces problems shouldn't even look at big mergers.

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Posted by Andreas at April 8, 2005 08:23 PM

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Posted by: videotape at March 2, 2006 01:06 AM

I personally think it wouldnt happen.Just look for tomorrow local news or perhaps the world news now.They have bigger issue to solve now.Also,they have been hostile to each other since long time.The big giant cant afford to repeat another mistake.

Posted by: carolyn at April 8, 2005 10:49 PM

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