How the Pfizer – Wyeth Merger came down
By Jason Hines on May 29, 2009
In January of 2009 Pfizer acquired Wyeth. This was a big deal – the largest pharmaceutical company acquired a major competitor. These sort of events offer plenty of opportunity for investors to make money and for market investigators to understand if news was spread inappropriately ahead.
To see how acquisition news about Pfizer was flying through the media in January we look at Acquisition Pfizer January and watch the results set imposed on a Google Finance visualization. We can first see that the 24/7Wallst blog post Jan 5 included an M&A speculation on Pfizer with a series of potential targets, including Wyeth – which in turn was a reference to a FT article on Jan 4, however the FT article did not include any Wyeth reference.
The stock price also takes a dive the 26th but we’ll soon take a deeper look at that.
Let’s first take a look at how this news came out. Clearly the key news flow hit Jan 26th, the day the merger was announced – as you can see in this calendar visualization. However you can also see that the news was out during preceding weekend (Jan 24-25th) and in full swing Friday 23rd.
Visualizing the timeline of this event we can see that the first explicit mention of the Pfizer-Wyeth merger was as we said Jan 5th. After that there was little mentioned on Pfizer acquisitions.
Adding in Wyeth to the search we can see that we do find an earlier reference to Wyeth acquiring the biotechnology company Crucell but no earlier Pfizer merger mentioning. In fact, Jan 7th the CEO of Wyeth states “… strong cash position could enable it to make new biotech acquisitions…” Pretty typical pre-acquisition negotiation posturing!
When we take a more careful look at the stock price – here plotted in Spotfire (http://www.spotfire.com) we can see that the price fell right away in the morning of the 26th (after weekend speculations).
However, interestingly enough we can see that the Pfizer price took a first small step downwards in the morning of Jan 23rd. It seems fair to speculate that a clear insight into the real time information flow from first speculation early on the 23 and onwards would have offered opportunities in trading.
Likewise that morning of the 23rd the Wyeth price took a good step up, again see below in Spotfire.
We did take a look at the options data for Pfizer and Wyeth, and most of the interesting action started to happen the 23rd, with one particular Wyeth options trade happening at 15.56 in afternoon of the 22nd – worth some further digging around to see if there was public knowledge out then matching that trade.
Into the future
Now all this said – what are the next things in pipeline for Pfizer/Wyeth that might be worth watching – as a investor or investor to be in the stock?
• Is the new Pfizer-GSK partnership anti-competitive? Britain’s competition watchdog has asked interested parties to submit input by June 9th on this.
• Pfizer is offering free drugs for those who have lost their health insurance until the end of the year
• Diving into the most recent Pfizer 10-Q filing we can learn about “$4.2 billion of cost-cutting expenses to be charged off, presumably spread over the rest of 2009 and all of 2010”, here reported by the FiercePharma blog. Time to update your financial model?
• Pfizer’s blockbuster drug Lipitor faces generic competition by 2011 at the time of patent expiration– fairly well known fact.
• Indian pharmaceutical company Lupin will be allowed to launch an American generic competitor to Wyeth’s Venlafaxine drug after June 11th 2011.
Obviously just some “random” examples, but a view into the future cannot be underestimated!
As always, we welcome your comments below!