July 15–New York City–Pharmaceutical giant Pfizer Inc. has agreed to acquire Pharmacia Corp. for $60 billion in stock, reportedly making it one of the most dominant drug makers in the world.

The transaction, which was approved on Sunday by the boards of both companies, is one of the largest deals in what remains a troubled and fragmented industry.
Drug companies, under intense pressure from politicians, employers and managed care companies to limit price increases, are having a hard time finding breakthrough products that would assure the robust earnings growth investors demand. Pfizer’s acquisition of Pharmacia, resulting in a company that would still control only 11 percent of the global market, is likely to hasten the industry’s continued consolidation.

The merger would create a behemoth with $48 billion in projected sales and many of the nation’s most widely used drugs. The combined company will have an annual research and development budget of more than $7 billion – dwarfing that of its closest rival, GlaxoSmithKline, by nearly half.

Pfizer – which already owns Zoloft, the antidepressant; Lipitor, the nation’s most widely prescribed cholesterol-lowering drug; and Viagra – would also gain control of Pharmacia’s Celebrex and Bextra, two high-selling arthritis drugs, and Detrol, a drug that treats bladder problems.

Pharmacia, formerly Pharmacia & Upjohn, is also the maker of the Nicorette gum smokers use to help them quit, the Rogaine baldness treatment and Luden’s throat drops.

Executives said that by creating economies of scale, the merger would help Pfizer to limit price increases. Pfizer is already being conservative about raising its prices, they say, noting that it has increased its price for Lipitor only modestly since acquiring it in the 2000 acquisition of Warner-Lambert.

Pfizer’s headquarters would remain in Midtown Manhattan. Pharmacia is based in Peapack, N.J. It is unclear how many of the combined company’s 150,000 employees would be let go. Pharmacia recently completed the purchase of AT&T’s former headquarters in Basking Ridge, N.J. It is unclear what would happen to its plans to relocate 2,500 employees there.