PFIZER INC 
By 
By Ransdell Pierson and Jessica Hall
Such an acquisition could help Pfizer, whose shares fell 2.4 percent, manage its revenue "cliff" in 2011 when its blockbuster Lipitor cholesterol treatment loses U.S. patent protection.
It would diversify Pfizer into vaccines and injectable biologic medicines by adding Wyeth's big-selling Prevnar vaccine for childhood infections and Enbrel rheumatoid arthritis treatment. The companies would realize major cost savings by streamlining areas that overlap.
"It sort of takes out the cliff and it balances their revenues with a portfolio of products that have a different profit life cycle" than traditional pills, said Barbara Ryan, an analyst with Deutsche Bank who has predicted large-scale consolidation in the pharmaceutical industry.
"I think it's eminently doable," Ryan said. "The question is whether others enter the fray. It's going to come down to price. The deal is attractive at this price, it's not attractive at any price."
Ryan said Pfizer could pursue Bristol-Myers Squibb
Pfizer and Wyeth have been in talks for months, but Pfizer may have difficult getting funding for a deal because of tight credit markets, sources said.
One source said any deal could be "weeks, if not months" away. But a second source said news of the talks could speed them up.
Pfizer would likely use a combination of cash and stock to acquire Madison, New Jersey-based Wyeth. New York-based Pfizer has a net cash position of $21 billion, according to Mike Krensavage, principal of Krensavage Asset Management.
Spokesmen for Pfizer and Wyeth declined to comment, citing company policies on market rumors.
Wyeth has been in talks to buy Dutch vaccine firm Crucell
But sources told Reuters the Pfizer-Wyeth talks will not necessarily scuttle Wyeth's Crucell deal.
ANOTHER DEAL FOR PFIZER?
Pfizer became the world's largest drugmaker with its purchase in 2000 of Warner-Lambert and the $60 billion acquisition three years later of Pharmacia.
The question for investors, many of whom continue to hold the stock largely because of its industry-topping dividend, is whether another acquisition of that scale will revive Pfizer over the long term, or only temporarily boost results.
Ultimately, a huge acquisition could make it harder for the merged company to grow from its larger revenue base and to prevent bureaucracy from stifling innovation.
Pfizer exemplifies the overriding problem for many large drugmakers, which have struggled to produce new blockbusters to replace those on which they lose exclusivity.
"We have, for many quarters now, said that Pfizer essentially has no realistic way of replacing the many drugs that are scheduled to go generic apart from doing a mega-merger," Sanford C. Bernstein analyst Tim Anderson said in a research note.
The global economic downturn has created a buyer's market for cash-rich drugmakers, prompting several deals.
Wyeth's market capitalization as of Thursday was about $52 billion, so at $60 billion, the deal would represent a 15 percent premium. Pfizer was valued at nearly $118 billion, based on Thursday's closing share price of $17.21.
Shares of Wyeth rose $3.47 to $42.30 in afternoon trading on the New York Stock Exchange. Pfizer fell 20 cents to $17.01.
COST SAVINGS
Aside from Prevnar and Enbrel, for which Wyeth shares rights with Amgen, Wyeth also is developing experimental Alzheimer's disease drugs which could be a major opportunity, although some believe such drugs are a longshot.
Pfizer would also gain Wyeth's large consumer health division that includes Advil painkillers more than two years after Pfizer sold off its own consumer health business to Johnson & Johnson
Pfizer's fortunes rose initially after its Warner-Lambert and Pharmacia deals thanks to huge merger-related cost savings, and outright ownership of Lipitor from Warner-Lambert.
Recently its performance flagged and shares dropped to more than 10-year lows in late 2008, after savings dried up and its $7 billion-a-year research budget failed to bear much fruit.
Pfizer, which reports fourth-quarter earnings next week, has said it expects 2008 revenue to be roughly similar to its 2007 revenue of $48 billion. It expects decent profit growth thanks to deep cost cuts.
(Additional reporting by Lewis Krauskopf in New York, Ben Hirschler in London and Ajay Kamalakaran in Bangalore, editing by Dave Zimmerman, Toni Reinhold and Matthew Lewis)
