Big and Bigger

The world's biggest drugmaker is going to get even bigger tomorrow.

Pfizer, Inc. says it has the go ahead from the U.S. and Canada to complete its $68 billion cash and stock acquisition of Wyeth. The union creates a dominant player in a number of areas. Pfizer will be much larger in vaccines, biotech, and consumer products.

The drugmaker also aims to be a much leaner company by cutting 20,000 jobs. The goal: Combine the two operations, including R&D departments, to more efficiently come up with new blockbuster products. That's particularly important as Pfizer faces a loss of patent protection for cholesterol drug Lipitor in 2011. The drug accounts for a quarter of Pfizer's sales.

With Wyeth (formerly known as American Home Products), Pfizer grows to more than $70 billion in annual sales and will have more than 100,000 employees even after the job cuts.

Bigger doesn't always mean better. But the expectations for such a sizable player will be much bigger.

"It does make it hard for these large companies to grow organically—there is a law of large numbers," says Timothy Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York. "A company like this is going to need blockbuster new drugs to produce a lot of revenue, but it can run more efficiently as a combined entity."

Ghriskey owned Pfizer and Wyeth stocks in the past but doesn't own them now largely because of uncertainty with health reform. He would consider buying Pfizer stock if the company signals a potential blockbuster (a product with at least $1 billion in yearly sales) on the horizon.