Pfizer Mends With Vicuron Buy

In a move to bolster its anti-infective franchise, Pfizer ( PFE) said Thursday it would pay $1.9 billion in cash -- representing a gigantic premium -- to acquire Vicuron Pharmaceuticals ( MICU).

Vicuron has two anti-infective drugs pending before the Food and Drug Administration, which should rule on both later this year.

Pfizer's offer places a value on Vicuron's stock at $29.10 a share. The stock jumped to $27.53 on Thursday, adding $11.73 or 74.2%. The shares rose as high as $27.93 and easily vaulted past the 52-week high of $18.33. Pfizer's stock was off 4 cents to $28.39.

The deal is expected to close during the third quarter, subject to regulatory approval and a vote by Vicuron's shareholders.

Pfizer has four big anti-infective drugs that produced $4.72 billion in sales last year, representing 9% of corporate revenue. But one of those drugs, Diflucan, an antifungal, lost patent U.S. protection in July 2004 and is losing sales. Its $945 million in sales last year represented a 20% drop from 2003.

An even bigger drug, the antibiotic Zithromax, will lose U.S. patent protection in November. Zithromax had worldwide sales of $1.85 billion last year, down 8% from 2003. The drug is most often used in treating respiratory infections. On Monday, the FDA approved Zmax, a one-dose version of Zithromax, as a treatment for mild to moderate acute bacterial sinusitis and community-acquired pneumonia in adults.

The other Pfizer anti-infectives are Zyvox ($463 million in sales last year) and Vfend ($287 million in 2004 sales).

Waiting for a Payoff

Vicuron, based in King of Prussia, Pa., has two drugs awaiting decisions by the FDA this year -- the antibiotic dalbavancin and the antifungal anidulafungin. Because both are so far along in the clinical and regulatory process, Pfizer is paying a big, but digestible price.

"We see the deal is strategically positive and at an acceptable valuation," says Catherine J. Arnold of Credit Suisse First Boston in a research report to clients. Arnold, who has a neutral rating on Pfizer, said the transaction should boost Pfizer's presence in hospitals.

Considering Pfizer's "need for products and its strong financial position, the price is not surprising," says Arnold, who doesn't own shares and whose firm has an investment banking relationship with Pfizer.

"Given Vicuron's two potentially blockbuster products ... plus a development program for novel antibiotics, we view this price as fair," adds Winton Gibbons of William Blair & Co., in a report to clients Thursday. Gibbons doesn't own shares, and his firm doesn't have an investment banking relationship with Pfizer.

Varied Uses

The FDA had been expected to rule on dalbavancin later this month, but the agency recently extended its action date by 90 days to Sept. 21. Gibbons says late-stage clinical trials have shown strong results in fighting complicated skin and soft tissue infections. A midstage clinical trial found the drug worked well in fighting bloodstream infections caused by catheters, Gibbons says.

Dalbavancin belongs to the same class of drugs as vancomycin, one of the most powerful antibiotics on the market that is administered to hospital patients who have dangerous bacterial infections that are resistant to other types of antibiotics. "Dalbavancin has been specifically designed as an improved alternative to vancomycin," Vicuron says.

Anidulafungin has produced positive late stage-clinical trial results for fighting fungal infections that affect the skin or mucous membrane but which also can enter the bloodstream and attack the heart. Test results issued earlier this year showed that Vicuron's drug did a better job than Pfizer's Diflucan.

Vicuron is seeking FDA approval of the drug for fungal infections of the esophagus. The agency is expected to act on Nov. 27.

Pfizer has been working with Vicuron on developing new antibiotics. Pfizer says these experimental pills are being tested to see if they have "improved potency and a broader spectrum of activity than existing classes of compounds." Pfizer is looking at several Vicuron compounds to see if they merit being tested in clinical trials.

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