Pfizer to acquire Wyeth

Pfizer Inc. wants to buy the maker of Robitussin, Dimetapp and ChapStick, products with deep manufacturing roots in the Richmond area.

Buying Wyeth for $68 billion moves Pfizer back into the over-the-counter consumer-health products market, a business the pharmaceutical giant exited in late 2006.

The deal makes Pfizer a more diversified company less reliant on its dwindling drug pipeline.

However, those consumer brands, most of which are manufactured at Wyeth's plant in eastern Henrico County, may not stay with Pfizer for long. Some industry observers believe that Pfizer may sell those brands to help pay off debt.

Wyeth employs about 1,200 people in the Richmond area.

The brands such as ChapStick and Robitussin were made by Richmond-based A.H. Robins Co. for decades. Wyeth has owned the Richmond-area operations since 1989 when the company, then called American Home Products, acquired A.H. Robins.

"We are looking forward to re-entering the consumer business segment," Pfizer spokeswoman Kristen Neese said. "We think of its as a great opportunity to further diversify our portfolio and revenue stream."

Pfizer, the maker of prescription drugs such as Viagra and Lipitor, sold its consumer health brands -- including Listerine, Nicorette and Sudafed -- to Johnson & Johnson to focus on pharmaceuticals.

Pfizer is acquiring Wyeth mostly to bolster its ability to produce new big-dollar prescription drugs.

The company is facing the loss of patent protection on key drugs such as cholesterol-fighter Lipitor, which is expected to face generic competition starting in November 2011. Lipitor brings in nearly $13 billion per year for the company, which generated $48.3 billion in revenue in 2008.

Wyeth brings its own strong pipeline of product development in biopharmaceuticals and vaccines, but that might not be enough to generate the cash flow Pfizer needs without selling some of Wyeth's assets.

Two Virginia professors who study the pharmaceutical industry and mergers were skeptical that Pfizer will hang on to the consumer health products business for very long, especially considering that Pfizer is taking on $22.5 billion in debt and offering $23 billion in stock to pay for the deal.

"I would be surprised if Pfizer held on to [the consumer products division] simply because it is a much different business model than they have chosen to pursue," said Drew Hess, a professor of management at the University of Virginia.

Wyeth's consumer health care products business generated about $2.72 billion of its $22.83 billion in revenue in 2008.

"When you look at Wyeth's [consumer products] business, they have some really wonderful brands -- Robitussin and ChapStick and Dimetapp -- but the consumer health group is a very small percentage of the overall sales, and they also do not fit into the strategic motivations of Pfizer," said Jeffrey Krug, an associate professor of strategic management at Virginia Commonwealth University.

"What could easily end up happening is that Wyeth will be unable to generate enough products to replace the sales that are lost through the expired patents," Krug said.

If Pfizer does sell the Wyeth consumer products business, the brands could go to a company such as Proctor & Gamble or Johnson & Johnson, though a sale to Johnson & Johnson could raise antitrust concerns because of that company's already heavy position in the over-the-counter market, Krug said.

The merger also gives Pfizer a trove of vaccines, biotech drugs and veterinary medicines from Wyeth's portfolio.

The deal means job cuts as the combined companies cut costs. Pfizer said it plans to cut about 8,000 jobs, 10 percent of its work force, as part of what it expects will be a staff reduction totaling 15 percent of the combined companies' workers -- implying a total job loss of about 19,000.

Last fall, Wyeth announced about 60 job cuts at the distribution center next to its manufacturing plant on Darbytown Road as part of a plan to consolidate its East Coast distribution centers.

A spokesman for Wyeth said no decisions have been made about job cuts as a result of the acquisition. Both companies, however, are in the middle of multiyear cost reduction initiatives.

Leonard Clarke, acting executive director of the Henrico County Economic Development Authority, said it was too early to know what the impact on the county would be from the acquisition of Wyeth. But he did express optimism that Wyeth's eastern Henrico plant would stay open.

"We're feeling pretty confident," he said, citing the number of products made at the plant.

Contact John Reid Blackwell at (804) 775-8123 or .

Staff writer Llouis Llovio and the Associated Press contributed to this report.