If the situation weren’t so pathetic, Connecticut’s Pfizer-watchers could laugh as the company tries to snooker British politicians this week into thinking the drug behemoth’s proposed, $106 billion takeover of AstraZenica makes sense.
The Brits ought to be smarter than U.S. officials who stood idly by as Pfizer destroyed value in its $218 billion worth of acquisitions since 2000, in three deals alone — Warner-Lambert, Pharmacia and Wyeth.
Groton, formerly the global R&D headquarters for Pfizer and home to 6,000 employees, is now mainly a large development office — not mentioned as CEO Ian Read touts the company’s top research locations. Groton still represents a very significant presence for Pfizer, perhaps 3,000, but it’s one of numerous sites the company has shrunk or shuttered after big mergers, where building demolitions and fire sales of facilities rule the day.
“We have hubs of science in La Jolla, and in the Bay Area, and in Cambridge, Massachusetts,” Read says in a newly released video designed to sell the AstraZenica deal as, in his words, “a win-win for society, a win-win for shareholders, and a win-win for stakeholders.”
It’s a win-win for top managers and investment bankers. Period.
Many people oppose the merger on the grounds that Pfizer, the world’s biggest drugmaker, is getting too big. The company, echoing the madness at similar-sized Comcast, claims it needs all that heft to develop hugely expensive, high-risk drugs.
But unlike Comcast, which actually has gotten too big, Pfizer has declined, when you consider its takeovers. In 2001, one year after acquiring Warner-Lambert for the bubble price of $93 billion, Pfizer had sales of $32 billion. Pharmacia had sales of $19 billion and Wyeth $14 billion, for a total of $65 billion — or $87 billion in today’s dollars.
Compare that $87 billion to Pfizer’s sales over the last 12 months: $51 billion, with a market value of $186 billion, less than it paid for the three companies.
Since the end of 2001, Pfizer’s shares have delivered a total return, including dividends, of 29 percent, compared with 110 percent for the S&P 500 index, and that’s with billions of dollars in stock buybacks. Remember, a stock buyback is just a way of shrinking a company, and for Pfizer that means it’s right where it was, only without its former competitors.
And yet, in the new videos, Read and Dolsten can hardly contain themselves, talking about all the good that will come of the AstraZenica deal — yet another match made in heaven, in their options-driven world.
“A combined company will have products and science that can address in an integrated manner what the patient needs and can take on disease management and offer much more value for patients and health care providers,” Dolsten gushed.
What he’s saying is that Pfizer could make itself into a global force for coordinating pharma development, not just another firm in the business. Basically, a utility, only private, for-profit — like the cable companies, speaking of Comcast.
Well, we already have three industries that are struggling mightily with disease management, thank you very much: The U.S. government through Centers for Disease Control and other agencies; the managed-care insurance industry; and the fractured health care industry itself, with a hospital system that’s under siege.
If we’re going to let the the drug industry turn itself into a public utility, we should regulate profits and executive pay. They’ve had it both ways long enough.