Pharmaceutical powerhouses Pfizer and Warner-Lambert have agreed to shed some businesses to sidestep antitrust concerns raised by the Federal Trade Commission, which last week conditionally approved a $90 billion merger of the drug companies.
The FTC conditions, which are outlined in a proposed consent agreement with the two companies, would require Warner-Lambert and Pfizer to divest a short list of overlapping businesses that, when combined, could adversely affect competition.
Among the FTC's proposed requirements, Warner-Lambert must end its agreement with Forest Laboratories to co-promote the antidepressant drug Celexa, which competes with Pfizer's Zoloft. Warner-Lambert also must divest assets tied to its Alzheimer's disease drug Cognex, a competitor to Pfizer's Aricept.
The merger will enable Pfizer to realize significant administrative savings and higher profitability, said Jack Lewin, M.D., chief executive officer of the California Medical Association.
"It is my profound hope that this company will return some of (those profits) to the ailing healthcare delivery system to make drugs more affordable," Lewin said.
Under the merger agreement, Pfizer will exchange 2.75 of its shares for each share of Warner-Lambert in a tax-free transaction. The deal was initially valued at $90 billion, but Pfizer's rising stock price moved it up to approximately $120 billion as of last week.
The companies first announced their plans to merge on Feb. 6, shortly after which the FTC began a three-month investigation into possible anti-competitive effects. The agency then reached a settlement agreement with the companies detailing the necessary divestitures.
Last week, the five FTC commissioners unanimously approved the settlement, which is still subject to a 30-day comment period before becoming final.
The merger, expected to close in late July, would create the world's largest pharmaceutical manufacturer with annual sales of more than $29 billion.