Reaction to Pfizer-Wyeth: Employees Despair, Plot Rebellion; Analysts Shrug; PFE Stock Down 10%

Reaction to the Pfizer-Wyeth merger is … mixed, to say the least.

• Pfizer employees think this will be Pharmacia/Warner-Lambert redux.
• Wall Street analysts are all over the place.
• Pfizer’s stock has lost 10 percent of its value between the opening bell and lunchtime.
• Wyeth’s rose 13 percent.
• Wyeth employees seem terrified by it… and some have organized a rebellion against it.

Here’s a selection of opinions from around the net:

From the Wyeth “protest letter” being circulated on Cafe Pharma:

… how will Wyeth benefit from this merger? They won’t. If you were to ask any Wyeth employee if they are in favor of this merger more than 99% of the employees would say no. Only the executive board and some shareholders stand to benefit from this merger.

From the Wyeth bulletin board on Cafe Pharma:

Wyeth people….take the first chance you have to get out. If a package comes your way grab it. Just ask any Pharmacia or Warner Lambert person that survived those acquisitions to only later be miserable and eventually fired. You probably have around 9 mos to a year before the merger will finalize and job cuts will actually occur. Do your job, be the loyal and devoted employee. Don’t trust anyone to utter anything other than the company line. But, very privately pursue other opportunities. Know the possibilities and have a plan of action.

This is your chance to do your best to see that it won’t happen. Other threads have advocated contacting your legislators. I have already done that. It can’t hurt, and it makes you feel like you are actually doing something. There is a good window of time here for Congress to stick it’s nose in and ask the FTC to investigate further, especially with a Democratic majority. Regardless of what side of the political fence you sit on, this deal is good for no one but the big shareholders who will make out like bandits. It’s not good for you, for your clients, or for the industry. Take a look at the press covering this story–there is a lot of skepticism about the success of this “merger.”

From the Pfizer bulletin board on Cafe Pharma:

Just give me a severence check so I can move on with my life.

Well, the Warner Lambert and Pharmacea mergers were great mergers. Not! Pfizer is a cancer.

I hope the Wyeth people wake up. Spoke to several and they believe they are safe do to our layoffs and the 30% they recently had.

As someone said, ” We are all just lines on an Excel spreadsheet”.

Wall Street analysts, in the Philly Inquirer:

Carol Levenson, an analyst with the research firm Gimme Credit L.L.C., said the acquisition could damage Pfizer’s credit outlook. “We don’t see why Wyeth is a solution to Pfizer’s problems - it has plenty of lingering legal and patent-expiration problems of its own,” she said in a note to clients. Wyeth last year lost patent protection on the antibiotic Zosyn and the heartburn drug Protonix.

In The Wall Street Journal:

Roopesh Patel of UBS: The purchase “is not transformational for the company — it doesn’t restore PFE to a growth path & doesn’t provide it with a robust enough R&D engine (which is what PFE needs the most).” That said, he wrote, working from the deal numbers cited by the press last night, it could be accretive for Pfizer by 2012 on a non-GAAP basis.

“We believe the anticipated earnings accretion only helps PFE avoid an earnings collapse from 2012 onwards (due to big patent expirations), and allows it to, at best, deliver roughly flat sales (~71 billion) and EPS from 2009-2015 (due to more patent pressure).”

Catherine Arnold of Credit Suisse: Pfizer had promised to hold its 32-cents-a-share dividend steady unless there was a major strategic transaction. “The magnitude of the cut was a question and we do suspect that halving the dividend to $0.16/share will be disappointing to high yield fund managers,” she wrote.

Seamus Fernandez of Leerink Swann: Writing before the deal was announced, he said the notion of acquiring Wyeth “well-conceived,” combining strategic assets. “Although our greatest fears are largely allayed” — that Pfizer would go for a costlier deal like Amgen — “we believe investor perception will be keyed to the details of the transaction.” A big dividend cut would be disappointing, especially without synergies of at least $6 billion over three to four years. (This morning, Pfizer promised $4 billion over three years.) Leadership of Wyeth’s vaccines division, most notably Emilio Emini, must be retained.

Barbara Ryan of Deutsche Bank: “We have argued that PFE would inevitably convert its cash and balance sheet into future [revenue] and [earnings per share] via a large acquisition,” she wrote. “In our view, the addition of visible revs and eps in the cliff period, as well as the necessary elimination of excess capacity within the sector, could drive multiple expansion.”

On Reuters:

“I think it shows their desperation,” said Natixis Bleichroeder analyst Jon LeCroy. “Without a pipeline it doesn’t much matter what a company does. Kindler’s been there a couple of years now, and the view is not much has been done,” LeCroy said. “So this was sort of inevitable if he wanted to keep his job.”

Sam Isaly, portfolio manager of OrbiMed Advisors: “Jeff Kindler is the most recent in a long string of losers at Pfizer,” said Isaly, who is not one to mince words. “He really inherited a junk pile. Even so, his board is going to insist that he do something. He doesn’t have much more time left, nor should he have much time left,” Isaly said of the CEO. Like Isaly, LeCroy expressed skepticism about whether the deal makes sense for Pfizer. “I don’t think it’s going to pay off for them,” LeCroy said. “Pfizer’s problem was they were already too big, and so just making the company bigger doesn’t solve the issue. The real issue is the R&D productivity is not there.”

Mike Krensavage, principal at Krensavage Asset Management: “The pros of a Pfizer/Wyeth deal probably outweigh the cons.” Although Wyeth next year loses patent protection on its own top drug, the antidepressant Effexor XR, Krensavage said it has no other major patent expirations in coming years. “Hopefully, biologics from Wyeth would give Pfizer a more sustainable revenue base because these products tend to provide evergreen sales,” he said, noting the lack in the United States of a pathway for generic versions of biotech medicines.