Pfizer is poised to agree a deal to buy rival Wyeth for $68bn.
The cash-and-stock deal, which has been approved by the Boards of Directors of both companies, will be financed through a combination of cash, debt and stock.
Pfizer and Wyeth claim that the combined company will be one of the most diverse in the healthcare industry and it expects that in 2012, no one drug will account for more than 10 per cent of the company's revenue.
Two of Pfizer's key products, its cholesterol drug Lipitor and its impotence treatment Viagra, are facing generic competition and a significant decline in sales when the patents expire in the next couple of years. The merger with Wyeth will see the company's profits come from a wider set of products.
Jeffrey B Kindler, chairman and CEO of Pfizer, said: "The new company will be an industry leader in human, animal and consumer health. With our combined biopharmaceuticals business, it will lead in primary and specialty care, as well as in small and large molecules. Its geographic presence in most of the world's developed and developing countries will be unrivalled."
Wyeth makes Prevnar, the first pneumococcal vaccine for infants, and co-markets the rheumatoid arthritis therapy, Enbrel with Amgen Inc.
Bernard Poussot, chairman, president and CEO of Wyeth, said: "With our business focused on prevention and wellness, Wyeth is well positioned in today's rapidly changing health care environment. Our employees should be enormously proud of what we have built and confident that combining with Pfizer will accelerate our pursuit of innovative new medicines to meet critical unmet patient needs. Wyeth and Pfizer are highly complementary businesses, and together we can build the best diversified health care company in the world."
The merger is subject to customary closing conditions, which include approval from Wyeth shareholders. The two companies expect the deal to close at the end of Q3 or during Q4 2009.
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