King Pharmaceuticals has accepted an offer from Pfizer to merge. This will put the number of pharma mergers this year to an unprecedented number. The second merger in 2 years for Pfizer, this is also the second-most-expensive deal. All told, King Pharmaceuticals will cost Pfizer about $ 3.6 billion. The combined company is intended to fight off losing income that happens when patents expire.
Having to pay a premium is ok if you’re obtaining King Pharmaceuticals
When Pfizer declared that it would be purchasing King Pharmaceuticals, the price announced was 40 percent over King’s current stock price. King’s price jumped to match the offer in trading on Mon. Either way, however, Pfizer certainly sees value in King Pharma, which manufactures mostly pain medication. Pfizer’s manufacturing and marketing divisions will get to determine the whole collection King Pharmaceuticals drugs have.
The Pfizer portfolio can get better
Pain medicine is what King Pharmaceuticals specializes in. This mostly what is made by it. King has been long developing “abuse-resistant” pain medicine meant to replace drugs for instance OxyContin. King Pharmaceuticals also sells vet drugs. Also, the EpiPen comes from the company. Also, a contract is already set between the Department of Defense and King Pharmaceuticals where pre-filled syringes of anti-nerve agent medication are made. Pfizer and King will merge operations which will merge all contracts.
Pfizer and King trying to avoid patent cliff
This isn’t the first time a merger and buyout has took place like this. Through buyouts, Pfizer has become the largest drug maker and seller in the world. The difficulties that come with Pfizer and King Pharmaceuticals are referred to as a “patent cliff” by the company. Patents protect drugs that come to sector at first. The patents has to expire for other corporations to copy the drug. This is how generic drugs are made. Pfizer’s best-selling drug, Lipitor, faces a 60 percent drop in the several-hundred million dollar a year sales when it falls off the patent cliff. The hope is that the purchase of King Pharmaceuticals and its drug portfolio will help make up for this decrease of income.
Articles cited
Associated Press
google.com/hostednews/ap/article/ALeqM5hbaoWbl-qz6f2UkSXhOhVLnVHFrwD9IQB2C01?docId=D9IQB2C01
NY Times
dealbook.blogs.nytimes.com/2010/10/12/pfizer-to-buy-king-pharmaceuticals-for-3-6-billion/
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