Starved of News, Press Speculates on Deals for Abbott, Pfizer and Wyeth
New Year is a slow news period, which is why the business press filled up with next-to-useless corporate strategy stories about Abbott Labs, Wyeth and Pfizer. The one thing these stories all have in common? They're long on speculation and short on substance. Let's take them one at a time.
Pfizer CEO Jeff Kindler in the FT:
Pfizer, the world's biggest pharmaceutical group, is willing to acquire a large rival drugs company to improve its financial health, in a move that could trigger a fresh round of mergers within the sector.BNET readers know that the likelihood of Pfizer making any major acquisition is a lot smaller than most people think it is, in part because because Kindler has been firmly focused on the first half of his quote and the second half is merely boilerplate that all CEOs have to say when they're asked about deal flow.Jeff Kindler, chief executive, said: "The real goal is to grow revenues . . . We are open to opportunities and constantly looking at those which are big, small and inbetween."
President of Wyeth Pharmaceuticals Joseph Mahady in ArabianBusiness.com:
Pharmaceutical firms look set to break with another tradition: the idea that the industry is recession-proof.This was the most interesting bit of an incredibly bland interview with Mahady. Why? Because for years drug companies in the U.S. have lobbied against public healthcare provision and pricing regulations that would extend health coverage to all Americans. Now, with 47 million uninsured and with no access to care, drug companies are starting to see a reduction in demand. Maybe socialized medicine ain't looking so bad after all ..."We are used to saying that drug companies fare fairly well during economic downturns," admits Mahady, who took the helm at Wyeth Pharmaceuticals in January last year. "[But] I don't think we've seen an economic downturn with a pharmaceutical environment like this."
The combination of challenges has taken its toll on Wyeth, with shares down 24 percent year-to-date. The firm has also registered a slowdown in drug consumption, particularly in its largest market, the US - despite data from IMS showing barely any decline in physician visits through to September.
Mahady lays the blame at America's underinsured healthcare system, where patients are often left to foot medical bills.
"I think in this environment you are likely to see consumption either decline or shift. Patients may try and stretch their medications out and we have data to suggest that patients are skipping visits to their physicians."
Abbott Labs CEO Miles White in Crain's Chicago Business:
Miles White, who reshaped Abbott Laboratories over the past decade through big deals, is positioned for another game-changer.This was an even more speculative piece than usual, because White refused to comment and the official position of the company is that it is done with deals for now. So why was it written? Because Wall Street analysts like Leerink Swan's Rick Wise and Deutsche Bank's Barbara Ryan love to talk about deals, and deals drive speculation over premiums on non-performing stock, etc, etc.Pharmaceutical companies are expected to go on buying sprees this year for potential blockbuster drugs at bargain prices. Abbott's buoyant stock price and record cash flow -- a projected $6 billion for 2008 -- gives Mr. White the currency he needs to strike deals, a hallmark of his nine-year tenure at the North Chicago-based maker of drugs and medical devices.