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Pfizer eyes Wyeth's drug pipeline

The pharma giant is slashing its own research and development staff, analysts say, and hoping a competitor can fill the void.

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By Aaron Smith, CNNMoney.com staff writer

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NEW YORK (CNNMoney.com) -- Pfizer is looking to a rival drugmaker to fortify its drug research and development efforts according to news reports and analysts.

Pfizer, which is the world's leading drugmaker in terms of sales, is in talks to buy Wyeth (WYE, Fortune 500) for at least $60 billion, according to the Wall Street Journal. Pfizer's stock slipped 1% on the news, while Wyeth is up about 8%.

Just days ago, on Jan. 13, Pfizer (PFE, Fortune 500) said it was cutting up to 8% of its R&D staff - about 800 jobs. Spokesman Raymond Kerins said this was to "raise productivity."

Spokesman from both companies declined to comment on any deal.

But analysts say that Pfizer is clearly trying to beef up its drug pipeline through an acquisition, adding that the company seems to have given up on its own R&D staff to come up with a blockbuster replace Lipitor. This cholesterol-cutting drug peaked in 2006 with nearly $13 billion in annual sales but will lose its patent protection in 2011, when generic versions will become available.

Les Funtleyder, pharma analyst for Miller Tabak, said that Pfizer is "not feeling that they're getting the efficiency out of their R&D unit." He said that Pfizer would probably rather do a deal with Wyeth over other competitors, because there is less overlap in the companies' pipelines.

Funtleyder said that Pfizer already has a diabetes franchise, which would overlap with Eli Lilly & Co. (LLY, Fortune 500) and Bristol-Myers Squibb (BMY, Fortune 500), both of which also focus on diabetes treatments. Pfizer probably has its eyes on Wyeth's Alzheimer's drug pipeline, he said. But he cautions that a merger won't be successful unless Wyeth's pipeline is successful, which remains to be seen, he said.

"If Wyeth comes out with an Alzheimer's drug that works, then the deal works," he said.

Pfizer is probably also focused on Wyeth's blockbuster children's vaccine Prevnar, said Michael Krensavage of Krensavage Asset Management, as well as its experimental biotech drugs.

Sales of Prevnar, which combats meningitis and blood infections, jumped 12% in the first nine months of 2008 compared to the same period the prior year, to $2.1 billion.

If a deal does go through, Funtleyder warns that Wyeth staffers should brace themselves for lay-offs.

"I can say with pretty good confidence that this is going to lead to some head count reduction," he said. To top of page

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