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Warner sues over drug pact
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November 29, 1999: 8:45 a.m. ET
Takeover target Warner-Lambert sues hostile bidder Pfizer to void Lipitor deal
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NEW YORK (CNNfn) - Drug maker Warner-Lambert Co., trying to fend off a hostile takeover from Pfizer Inc., on Monday filed suit against Pfizer to force it out of their joint marketing agreement on the $3.6 billion-a-year cholesterol-lowering drug Lipitor.
Warner-Lambert, the Morris Plains, N.J.-based maker of Lipitor, claimed in court papers filed in Delaware that New York-based Pfizer breached the marketing pact by improperly using information about the drug as it formulated its bid for Warner-Lambert, first valued at $82.4 billion and now worth about $80.4 billion.
Lodewijk J.R. de Vink, Warner-Lambert (WLA) chairman and chief executive officer, said: "Pfizer cannot commit flagrant breaches of contract, as it has, and expect to continue to receive the fruits of this relationship."
One person close to Warner-Lambert said that it was "inconceivable” that Pfizer made its bid without considering the benefit of gaining total control of the drug - and that’s against the pact’s language.
In a response late Monday, Pfizer (PFE) said Warner-Lambert’s suit amounted to "desperate measures” and signaled "more of its entrenchment strategy.”
The last straw in takeover defense?
Pfizer is trying to scuttle Warner-Lambert’s plans for a friendly all-stock merger with American Home Products Corp. (AHP) first valued at $71 billion and now worth $69 billion due to stock fluctuations.
The countersuit amounts to a dispute about the terms of the Lipitor agreement, which was signed in 1996 and has produced one of the hottest drugs the pharmaceutical industry has ever seen.
Analysts have variously speculated that Warner-Lambert would have to be very careful in calling for the end of the Lipitor alliance because Pfizer, with a potent marketing apparatus, has been instrumental in building sales numbers for the drug.
Warner-Lambert admitted that was a concern, saying, "we satisfied ourselves that marketing of Lipitor would not suffer.”
The salvo breaks a lull in Warner-Lambert’s takeover defense, which is due for a hearing in a Delaware court early next year, after Pfizer sued to prevent the American Home deal before Warner-Lambert shareholders can mull Pfizer’s bid.
And highlighting its eagerness to hold on to the Lipitor pact, Pfizer last week filed a second lawsuit claiming Warner-Lambert violated the Lipitor deal.
Warner-Lambert’s countersuit seeks a declaratory judgment that would allow it to end the Lipitor pact. The person close to Warner-Lambert said the drug maker hopes for a hearing by March, which should give it ample time before shareholder votes on the American Home deal scheduled for mid-May.
Warner-Lambert reiterated its belief Pfizer has misunderstood the terms of the Lipitor deal. The drug has become the centerpiece of their squabble.
According to Warner-Lambert, the pact’s terms would be void only if there had been a buyout offer for Warner-Lambert; the company said the deal with American Home is a merger of equals, offering no premium, and is thus not a buyout.
Warner-Lambert said a court victory on its counterclaim would lift its obligation to make payments to or share revenues with Pfizer with respect to Lipitor.
Ending the accord, Warner-Lambert said, still wouldn’t allow Pfizer to make an offer. Warner-Lambert also said it has not attempted to prevent Pfizer from making any offers through a preliminary injunction. 
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