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Pfizer buys biotech working on antibiotic

The acquisition could be the first of many as drugmakers find themselves with cash.

In the latest foray by a pharmaceutical behemoth outside its research labs for biotech drugs, Pfizer Inc.'s said Thursday it would pay $1.9-billion in cash for a tiny company that makes a new breed of antibiotics.

Pfizer is offering to shareholders of Vicuron Pharmaceuticals $29.10 a share, a 74 percent premium over the biotech's average stock price the past 90 days.

Such a hefty premium underscores the industry's need to bolster lackluster research programs and replace lucrative drugs soon to be threatened by generic competition because of expiring patents.

Pfizer's share price rose 17 cents to close at $28.60 on the New York Stock Exchange Thursday. Vicuron shares soared 78.5 percent, or $12.41, to close at $28.21 on the Nasdaq Stock Market.

Vicuron is based in the Philadelphia suburb King of Prussia and employs about 200 workers.

Despite their high-profile safety and acquisition problems, most large drug companies are each awash in billions of dollars in cash, some of it repatriated from overseas operations because of recent changes in the U.S. tax code.

Pfizer expects a $28-billion windfall in such overseas profits.

That cash position could herald a new wave of similar acquisitions, analysts said. Pfizer is sitting on $24-billion in cash and investments and has an annual cash flow of $16-billion. The Vicuron acquisition, which Pfizer hopes to close by the third quarter, will be the third such purchase this year for the New York company.

Analysts said the acquisition reinforces the notion that biotechnology serves as the pharmaceutical industry's research and development arm.

Many biotechnology companies are trading near annual lows, making them ripe for a takeover.

"With all the weak pipelines in large pharmaceuticals, there is a shortage of drugs nearing the market," said analyst Scott Henry of Oppenheimer & Co. "You're likely to see more acquisitions of small and mid size companies."

Pfizer is slated to lose as much as $9-billion in revenue in the next four years when patents expire on antidepressant Zoloft, allergy medicine Zyrtec and blood-pressure medicine Norvasc.

Pfizer's Zithromax, with annual sales of $1.85-billion, is the world's best-selling antibiotic. It faces generic competition this year when its patent expires.

Analysts said the Vicuron acquisition is a good, if pricey, fit for Pfizer.

The deal gives Pfizer two infection-fighting drugs under review for approval by the U.S. Food and Drug Administration: anidulafungin for fungal infections and dalbavancin for skin and soft tissue infections.

With an antibiotic sales force in place, analysts said Pfizer should have little trouble marketing the drugs if they're approved by the FDA this year.

[Last modified June 17, 2005, 00:34:18]