King Pharmaceuticals to be bought out by Pharma giant Pfizer
In the latest pharmaceutical merger this year, King Pharmaceuticals will be bought out by Pfizer. Worth $3.6 billion, this deal is the second-largest merger purchase ever by Pfizer. Pfizer is merging with King to try to fight off the loss of income that happens when patents expire.
King Pharmaceuticals worth a premium
When Pfizer announced that it would be purchasing King Pharmaceuticals, the price announced was 40 percent over King’s current stock price. In Monday trading, the price of King jumped to almost match the offer price. Either way, however, Pfizer obviously sees value in King Pharma, which manufactures mostly pain medication. The entire portfolio of King Pharmaceuticals drugs will be rolled into Pfizer’s manufacturing and marketing divisions.
Expanding the Pfizer portfolio
King Pharmaceuticals is a drug maker that specializes in pain medication. King has been long developing “abuse-resistant” pain medication intended to replace drugs such as OxyContin. King Pharmaceuticals also develops and sells veterinary drugs and the EpiPen. King Pharmaceuticals also has a contract with the Department of Defense to provide pre-filled syringes of anti-nerve agent medications. These contracts will be merged at the same time Pfizer and King merge their operations.
Pfzier and King trying to avoid patent cliff
There has been a spate of pharmaceutical mergers and buyouts in recent years. Through buyouts, Pfzier has become the largest drugmaker and seller in the world. Pfzier, as well as King Pharmaceuticals, faces a serious income problem in what the industry refers to as the “patent cliff.” Most drugs, when they first are approved and reach market, are protected by patents. However, when that patent expires, less expensive generics of the drugs are manufactured. Pfzier’s best-selling drug, Lipitor, faces a 60 percent drop in its several-hundred million dollar a year sales when it falls off the patent cliff. The hope is that the purchase of King Pharmaceuticals and its drug portfolio will help make up for this loss of income.