When any two mega-companies join hands, some suffering will follow. Who stands to lose when Pfizer and Wyeth wrap up their big merger?
There's already one casualty: Dutch biotech Crucell. Wyeth had been negotiating to buy the vaccine maker, but now that the Big Pharma has bailed out of those talks, Crucell's stock is tanking. The curtness of its public statement about the potential deal's collapse --"Wyeth has withdrawn from discussions regarding a potential combination of the two companies," period, end of story--may reflect the hurt feelings that ensue when a stock loses nearly a quarter of its value.
Next come the layoffs. Pfizer announced today that it plans to cut another 10 percent of its workforce, or 7,800 jobs. And analysts say that the job-shedding that will attend the merger will likely hit Wyeth harder than Pfizer. Making the deal profitable would require deep workforce cuts, they told the Philadelphia Inquirer. "Generally, in this kind of deal, you would be looking at 25 to 30 percent cost reduction," pharma watcher Daniel Hoffman told the paper, "but here it's going to be more like 50 percent."
Yikes. And Sanford C. Bernstein analyst Timothy Anderson predicts Pfizer would cut 70 percent of Wyeth's current $10 billion spending on R&D and marketing/admin.
And if this deal triggers a series of combos, as some market-watchers speculate, we'll see similar job-and-cost cuts after those mergers. Will other drugmakers be able to resist? If you listen to GlaxoSmithKline's Andrew Witty (photo), you'll say no. "If one big company makes a move, I can absolutely imagine that triggering off a series of moves," Witty told Bloomberg News before the Pfizer-Wyeth deal went public. "The industry has historically habitually demonstrated its inability to sit on its hands when someone moves. "