Pfizer To Buy King Pharma

Continuing its race to bulk up before a key patent expires, Pfizer has agreed to acquire the specialty drug company King Pharmaceuticals for $3.6 billion.

Based in Bristol, Tenn., King markets pain relief drugs that are formulated to discourage misuse and abuse. It also operates an animal health unit and runs an auto-injector business that produces an insulin pen and supplies antidotes to the U.S. government. King's sales last year were about $1.8 billion.

Compared to Pfizer's 2009 acquisition of Wyeth for $68 billion, the purchase of King may seem like an afterthought. But both deals anticipate the end of patent protection next year for the cholesterol drug Lipitor, which had $11.4 billion in 2009 sales. Pfizer will lose most of that business when generic competitors hit the market.

Pfizer pointed out that it also has strategic reasons to purchase King. Pfizer's existing pain relief products, Lyrica and Celebrex, bring in more than $5 billion a year in total, and it has a complementary animal health business.

Pain relief was the focus of Pfizer's announcement of the deal as well as a conference call with stock analysts. The firm noted that U.S. physicians dispensed some 320 million prescriptions to treat pain in 2009 and that abuse of pain treatments is a major public health issue.

King recently launched Embeda, which combines morphine with the opioid receptor antagonist naltrexone. The drug is "the first approved opioid pain product with design features intended to discourage misuse and abuse," Pfizer said.

And in development at King is Remoxy, an oxycodone-containing capsule that uses a viscous base component, sucrose acetate isobutyrate, to thwart crushing or dissolving by abusers. The safeguards in Purdue Pharma's OxyContin, the top-selling oxycodone drug, have been criticized as being easy for abusers to bypass. In fact, on the conference call, Olivier Brandicourt, president of Pfizer's primary care business, touted Remoxy's technological and marketplace advantages over OxyContin.

The analysts on the call sounded generally bullish on the acquisition. In a subsequent note to investors, Leerink Swann analyst Seamus Fernandez called it "a straightforward and well-conceived strategic move."