Warner-Lambert Threatens to End Lipitor Arrangement With Pfizer

Updated from 2:33 p.m. EST

As Pfizer (PFE Quote) gears up for a meeting Tuesday to promote the benefits of its unsolicited $75 billion all-stock takeover bid for Warner-Lambert (WLA Quote), Warner Monday threatened to end the companies' co-marketing pact for the highly lucrative cholesterol-fighting drug Lipitor.

In a press release and a letter from Warner Chairman Lodewijk J.R. de Vink to Pfizer chief William Steere, Warner-Lambert said it believes Pfizer's unsolicited bid may violate a standstill agreement in the Lipitor deal. That could allow Warner to exercise its right to end the deal, in which Pfizer and Warner co-market the drug, which is made by Warner and which is viewed by pharmaceutical analysts as the prize in any deal involving Warner.

A Warner-Lambert spokeswoman described the standstill provision as a standard clause in a co-marketing deal.

In pushing its side of the story for Wall Street, Warner, which has agreed to a $71 billion merger with American Home Products (AHP Quote), also said it wants to publish confidential information relating to the Lipitor contract. Warner said that in order to judge the deals against one another, shareholders and investors should know the actual value of Lipitor over time to both companies; the consequences of Warner-Lambert's right to reduce Pfizer's role in marketing Lipitor; and what Warner-Lambert gains and Pfizer loses if Warner-Lambert terminates the deal.

"It is clear that Pfizer is both using to its own advantage and failing to disclose, to the detriment of Warner-Lambert's and Pfizer's shareholders, information about the Lipitor arrangements which is of unique importance to both sets of shareholders in assessing the current situation," de Vink wrote.

Pfizer disputed Warner-Lambert's claim. Paul S. Miller, the company's executive vice president and general counsel, said on Monday afternoon in a statement: "Let me make it very clear that there has been no breach of any sort with respect to those agreements. Any such suggestion by Warner-Lambert to the contrary is simply inappropriate and wrong."

Miller went on to say that Pfizer would allow Warner-Lambert to release information from the confidential portion of the Lipitor contract.

Whichever two companies eventually unite would create the world's largest pharmaceutical company.

"It's a public relations game now," said Hemant Shah, an independent analyst. "At the end of the day, whoever has a better offer is going to win."

At the moment, Pfizer has the better offer financially, but its stock has steadily dropped since it made its takeover bid, which could cause Warner-Lambert's shareholders to favor American Home. Warner-Lambert's executives are believed by analysts to favor the American Home deal because they would retain the authority they might lose if Pfizer gobbled up the company.

Monday afternoon, Pfizer dropped 5/16 to 34 13/16, Warner-Lambert slid 15/16 to 92 11/16 and American Home fell 5/8 to 55 5/16. (Pfizer closed down 1/8 to 35, Warner-Lambert finished down 3/4 to 92 7/8 while American Home closed down 1/16 to 55 7/8.)

Shah didn't read much into Warner-Lambert's threats but said he could reassess his opinion if the companies release the contract for Lipitor.