Will Pfizer - Wyeth Product Overlap Present Antitrust Problems?

The first and most glaring product overlap associated with the Pfizer (PFE) - Wyeth (WYE) deal involves WYE's "Effexor" and PFE's "Zoloft" antidepressant drugs. These are two of the top antidepressants on the market and among the most highly marketed and internationally recognized products in this segment.

As the chart below from 2006 illustrates, Effexor and Zoloft each have close to 20% of this lucrative market, so the combined entity would have close to 40% of the overall market. Granted, this data is almost four years old, but it is believed to closely reflect the current market conditions for this particular product niche.

This first overlap presents an interesting scenario for the antitrust review aspect of the transaction. Under recent FTC/DOJ leadership, the 40% market share threshold that previously (c. pre-2002) signaled probable HSR delays was essentially ignored. This deal, and this specific product overlap, will likely challenge the future FTC/DOJ if indeed the new administration intends to enforce antitrust guidelines more strictly.

In general, this overlap does not appear to be highly problematic due to the presence of several other high-profile alternative products, a variety of promising pipeline products from other players, and combined market share which is certainly not dominant by any market definition. While the Effexor/Zoloft overlap will almost certainly be a point of interest for competition regulators, it is entirely possible that no remedy will be necessary in terms of divestiture.

Most importantly, since Effexor is WYE's top selling product (rough 17% of all sales), the perception that this overlap may not be a major problem bodes very well for the overall transaction. Once again it must be stated that this merger appears to be remarkably clean from a competitive standpoint based on the information obtained so far.

Naturally, additional research into the remaining product overlaps and further assessment of the financing aspects will be necessary to fully understand this deal's future.

Comments

[Scott Hinds:]

Zoloft went off patent in 2006, and currently has a market share of less than 1%. PFE reported FY2008 U.S. Zoloft revenues of just $24MM; Effexor's U.S. revenues during the same period were $2.7B. This is a non-issue.

Feb 03 01:31 PM

[donzelion:]

Patent issues raise problematic concerns when they interact with anti-trust review. In theory, every patent confers an automatic but temporary monopoly; the mere fact that a company has many, many patents (or products) is no basis for a claim of anti-trust violations.

The way I understand it, if, for example, Pfizer Wyeth were to abuse its size by compelling doctors to buy both its SSRIs and SNRIs at a certain price so that other anti-depressants got frozen out - then there'd be a review and penalty, but that would require a post facto study of actual conduct by Pfizer, rather than a prima facie review of what they might do.

Feb 04 04:17 AM

[ZiggaZagga:]

Do your homework M & A Researcher.... or better still, get someone else to do it as you're pretty hopeless.

Feb 04 05:25 AM

[User 342958:]

See also animal health.

Feb 04 07:58 AM

[Pharma empl...:]

M & A "Researcher" ?????
Zoloft close to 20%??????
...Now I know what to expect from future analysis from this analyst

Feb 04 04:00 PM