The research benefits of the merger
"Pfizer Inc.'s proposed $72 billion acquisition of Warner-Lambert Co. appears driven not only by the prospect of new drugs, but also by something even more fundamental: people.
In its hostile bid to wrest Warner-Lambert away from American Home Products Corp., Pfizer clearly has its eye on gaining control of Lipitor, a blockbuster cholesterol-lowering drug the companies jointly market. But another crucial reason why Pfizer finds Warner-Lambert attractive is its vast research labs and stable of top-notch scientists...
This summer, months before Warner-Lambert entered the picture, Pfizer's top research executives concluded that its massive research campus in Groton, Conn., wasn't large enough to [keep pace with the ongoing] revolution in genetics and biology [that] is rapidly overturning the way drug companies do business. The company decided to begin searching for sites where it could build a second major U.S. laboratory ... This strategy was far from ideal: It takes several years to build a new research campus, and many more years to fill it with scientists, because competition for top-flight talent is fierce ... Warner-Lambert offers a nice instant fix because it has a modern lab in Ann Arbor, Mich., already staffed with top scientists ...
Aside from sheer numbers of researchers, Warner-Lambert's staff will complement Pfizer nicely in brain and nervous-system research. Pfizer, for instance, is strong in potential new drugs for mood disorders such as anxiety and depression; Warner-Lambert does more research into other brain disorders such as epilepsy and Parkinson's disease ...
Under [the alternative] American Home/Warner Lambert merger, both companies would retain all their major existing research sites: ... the two companies aim to keep research decentralized enough so that scientists have freedom to be creative and aren't stifled by too many layers of management ...
Executives ... agree that scale is important--but only to a certain extent. Ultimately, they say, what is most important is the quality of research. "A lot of companies spend a lot of dollars on research and don't get anything out of it," said Anthony Wild, president of Warner-Lambert's pharmaceutical unit."
Source: Robert Langreth, "Pfizer Covets Warner's Labs, Research Staff," The Wall Street Journal, November 19, 1999
On February 7, 2000, Pfizer and Warner-Lambert agreed to a $90 billion merger. Former suitor American Home agreed to walk away with a $1.8 billion breakup fee. The merger was cleared by the European Commission on May 22 and by the Federal Trade Commission (FTC) on June 19, 2000.