A Pfizer-Allergan marriage could prove hard on their manufacturing networks

Pfizer CEO Ian Read

Pfizer and Allergan are reportedly close to announcing a merger that would turn the two into the largest of the Big Pharma companies, Bloomberg has reported. They also would have the largest manufacturing network with possibly more than 100 production facilities. But Pfizer's acquisition record suggests that number would shrink significantly postmerger as it looks for ways to cut costs to pay for the massive deal.

Citing sources, Bloomberg reports an announcement could come by Monday with Pfizer offering as much as $380 a share, which would put a deal close to $150 billion.

Pfizer ($PFE) currently has about 65 plants since picking up Hospira in September. A hookup with Allergan ($AGN) would add another 40. As pointed out by in-PharmaTechnologist.com, Pfizer was quick to cut manufacturing after its 2009 merger with Wyeth. It targeted 8 plants for closure and 6 more for reductions, eliminating 6,000 jobs in the process. That was more than 30% of the total 19,500 total jobs it said would be eliminated postmerger.

Before starting talks with Pfizer about a deal, Allergan had said that it would sell its generics business to Teva Pharmaceuticals ($TEVA). If that divestiture goes forward, that would take some plants out of the equation and potentially save those jobs.

Manufacturing can be an easy place for companies to look for cuts. It has high operating costs and requires large capital outlays and a significant headcount. Redundancy allows one plant to absorb production when another is closed. Pfizer, like any company, regularly makes adjustments in its network with the ebb and flow of business, but sometimes finds buyers willing to take on employees.

In September it struck a deal to sell a plant in Thane, India, for nearly $27 million that it had slated to close. Dozens of jobs there were expected to be saved. In 2012 it sold a plant in Puerto Rico to Mexican drugmaker Neolpharma, which took on the 130 employees. This year it reversed a decision to close a plant in Little Island, Ireland, and instead added jobs after sales of off-patent cholesterol fighter Lipitor held up better than forecast.

Pfizer CEO Ian Read has indicated that it would be helpful to do a deal yet this year, before a new session of Congress might decide to change rules for so-called tax inversions when a U.S. company cuts its tax rate by buying a company like Ireland-based Allergan that is based in a low-tax country.

- here's the Bloomberg news
- read the in-PharmaTechnologist.com story

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