The Pfizer-Wyeth merger isn’t mainly about cost-cutting, says Pfizer’s Kindler. Nevertheless, he intends to eliminate concerning 20,000 jobs

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Jeffrey B. Kindler, CEO of Pfizer (L) and Bernard Poussot, CEO of Wyeth Mario Tama/Getty Images

By Catherine Arnst

Pfizer’s (PFE) announcement adhering Jan. 26 that it will buy Wyeth (WYE) during the term of $68 billion in pay in money and stock called up visions of past Pfizer acquisitions against many pharmaceutical executives—and some of those visions resembled nightmares. But Pfizer CEO Jeffrey Kindler, who took the top job in 2006, insists the Wyeth deal is divers from its earlier mega-mergers with Warner-Lambert in 2000 and Pharmacia in 2003.

Kindler told a news conference that the Wyeth merger is not about "a single proceeds or cost-cutting," as with past deals. Instead, "it’sitting in an opposite direction creating a extended, diversified portfolio."

Nevertheless, cost-cutting there will be. Pfizer expects to achieve concerning $4 billion in "synergies" by 2012, enabling it to bring to want the combined workforce of the two companies by 15%, or more 20,000 jobs. As part of those synergies, Pfizer announced Monday that it will eliminate 8,000 jobs, 10% of its workforce. It is closing five of its 46 manufacturing plants.

The company went through similar rounds of cost-cutting when it acquired Warner-Lambert in a deal worth $90 billion, and at the time that it bought Pharmacia by reason of $60 billion. Those acquisitions sparked criticism in the pharmaceutical effort; labors because of the brutal staff cutbacks and—at least in the case of Pharmacia—because in that place was no big deed gain. Pfizer acquired Warner-Lambert mainly in favor of the cholesterol-lowering deaden with narcotics Lipitor, which went on to become the world’s best-selling drug. The company targeted Pharmacia primarily to acquire Celebrex, a top-selling pain pill. But Celebrex was in the sort drug class as Merck’s (MRK) troubled Vioxx, and when that drug was pulled from the market in 2004 for safety reasons, Celebrex sales hurl down off a cliff. Pfizer’s stock has slid more than 50% since the Warner-Lambert apportion.

The brace earlier mergers were done on quondam CEO Hank McKinnell’s watch. Kindler said the company "has obviously learned a lot from our prior acquisitions" and believes it can do layoffs this time on the outside of harming morale and productivity. He emphasized that the combined company will have a substantial edge in scrutiny and science, though Pfizer announced in early December that it will lay off 800 of its own scientists.

The deal was generally applauded without interruption Wall Street because Pfizer desperately needs a diversified portfolio of new drugs and has been powerless to create enough of them on its own. Currently 25% of its revenues come from Lipitor, but the drug is due to lose clear protection in November 2011. In fact, other looming conspicuous expirations mean Pfizer could lose 70% of its 2007 revenues by 2015, and in that place are no potential blockbusters in its near-term unfolding pipeline to make up the difference.

Wyeth has been struggling with similar problems. Its two biggest drugs, Effexor toward depression and Protonix for heartburn, are coming off patent in 2010 and 2011, respectively. Kindler says Pfizer doesn’t want Wyeth for those blockbusters but for its strong position in vaccines, biologic drugs, veterinary drug, and consumer products—areas where Pfizer has little presence (it sold its consumer-products dealing to Johnson & Johnson (JNJ) for $16.6 billion in 2006). Kindler also praised Wyeth’s promising development portfolio of Alzheimer’s disease drugs, any one one of which could become a blockbuster upon reaching the market.