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News > Deals
The drug behind the deal
February 7, 2000: 4:24 p.m. ET

For Pfizer, cholesterol drug Lipitor was at the heart of its $90B takeover bid
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NEW YORK (CNNfn) - For a long time, No. 2 U.S. drug maker Pfizer Inc. declared that it had the means to go it alone, shunning the prospect of a big acquisition. But the development of a hot-selling heart drug by a smaller rival - and Pfizer's lucrative pact to help market the treatment - helped change all of that.
    At the heart of Pfizer's (PFE: Research, Estimates) proposed $90 billion buyout Monday of Warner-Lambert Co.  (WLA: Research, Estimates) is the potent cholesterol drug Lipitor, a treatment that is on track to become the biggest selling prescription medication ever. Warner-Lambert Co., which makes Lipitor, co-markets it with Pfizer, which will now gain full control over the blockbuster drug.
    Pfizer, best known for the male impotence treatment Viagra, and Warner-Lambert were scheduled to go to court next week in a high-stakes battle for control over Lipitor - litigation that now becomes moot.
    For Pfizer, "the fear that they could potentially lose Lipitor was a major factor," in breaking up Warner-Lambert's merger deal with American Home Products Corp. (AHP: Research, Estimates) and going after the firm itself, said Premal Pajwani, a pharmaceutical industry analyst at Schroder & Co.
    In addition to Lipitor, other factors driving the deal were Pfizer's relatively weak drug development pipeline and some recent product setbacks, he said.
    Analysts say that Lipitor, one of several so-called "statin" drugs that help reduce dangerous levels of cholesterol in the bloodstream, will help power the new company's growth, possibly making it the biggest global drug maker in a matter of years.
    Lipitor racked up $3.7 billion in sales last year. Sales of Lipitor are expected to exceed $5 billion this year, including results from a launch into the lucrative Japanese market this spring, and could be on its way to becoming the world's first $10 billion-a-year medicine.
    "By the way the sales growth is going for this company, it could soon overtake the proposed merger of Glaxo Wellcome and SmithKline Beecham," said Michael Krensavage, a pharmaceutical analyst at Brown Brothers Harriman. "This is going to be a very strong pharmaceutical company. It will be a formidable opponent."
    Lipitor was introduced in 1997 in a competitive field including several other statin drugs. But the drug has easily become the market leader, controlling about 42.3 percent of the market as of December 1999, compared with 30.1 percent for Merck & Co.'s  (MRK: Research, Estimates) Zocor and 16.6 percent for Pravachol, made by Bristol-Myers Squibb (BMY: Research, Estimates), according to data from drug research firm IMS Health.
    "The reason that Lipitor is so popular is for two things -- it seems to work rapidly and it seems to be pretty good from the standpoint of side effects," said John Calfee, a resident scholar at the American Enterprise Institute and the author of the new book, "Prices, Markets and the Pharmaceutical Revolution."
    Before Warner-Lambert developed Lipitor, the company was better known for producing consumer products, such as breath mints and mouthwash,  than for developing blockbuster drugs. The company's Parke-Davis pharmaceutical unit brought Lipitor into being, after more than 10 years of research and development.
    "The drug is really a very good drug without a doubt, and in marketing, they (Pfizer) just had a very effective message,"  Pajwani said. "In classic Pfizer style, they put a lot of resources behind the drug -- it caught a lot of the competitors off-guard."
    In December, British-Swedish pharmaceutical company AstraZeneca PLC announced that it is developing a highly potent cholesterol-lowering drug that it says will be more effective than Lipitor. The company hopes to submit the drug for regulatory approval in the first half of 2001.
    But Pajwani said that early studies suggest that AstraZeneca's compound is not any more effective than Lipitor, and that Lipitor has a head start of several years in the marketplace.  Back to top

  RELATED STORIES

AstraZeneca creating Lipitor rival? - Dec. 8, 1999

Pfizer, W-L strike deal - Feb. 7, 2000

  RELATED SITES

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.