Cash-Rich Drugmakers Eye Mergers or Acquisitions

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One tier down from GSK on the drug industry food chain are a host of smaller, well-established companies, any of which could be snatched up by a bigger player. Among potential prey, the tastiest may be Wyeth. Its 56-year-old CEO, Poussot, ran the international drug unit, while his company dealt with one of the biggest product liability disasters the industry has ever seen: In 1997 its weight-loss drug fen-phen was pulled from the market after it was linked to heart valve defects. Now Wyeth has a pipeline with some promising drug candidates, including one for Alzheimer's disease. But Poussot is ever mindful of Wyeth's bargain-basement $45 billion valuation, so the 6-foot-7 former basketball ace is playing defense, hoping to stay independent.

Poussot has been CEO of Wyeth only since January. Yet in his 20-year romp up the ranks, he has helped turn the Madison (N.J.)-based company into a leading player in prescription and over-the-counter drugs as well as vaccines and animal health products. Even so, with yearly sales of $23 billion, Wyeth is a mere shadow of companies such as Glaxo, which is nearly double Wyeth's size in revenue and has a market cap of $96 billion. And because sales have been growing by just 10% a year or less and the stock has been lackluster for the last year, Wyeth is seen as vulnerable. "We need to constantly fight for more productive ways of doing business," says the soft-spoken, professorial CEO.

Poussot's talent for building Wyeth's R&D muscle without getting distracted by fen-phen made him a star. As the diet drug blew up, the company sequestered its litigation team and charged Poussot and a few other top executives with developing new medicines. Poussot had shown his stuff earlier that year, when he compelled Wyeth's U.S. and international drug development teams to integrate their activities. Now he's working on a different sort of assimilation, bringing insurance companies and doctors in to offer opinions on drugs that are several years away from reaching the market. It's partly a response to demands this year from European and U.S. regulators, who are refusing to approve new Wyeth drugs without first seeing additional data to prove they are safe and effective. He hopes the outside voices will help guide the company toward the best opportunities—the drugs that doctors really want and that insurance companies will reimburse.

Diversifying beyond drugs might also help keep Wyeth independent, Poussot believes. He has been shifting some of the company's resources into other endeavors, expanding its consumer blockbuster brands such as Robitussin cough syrup and Centrum multivitamins in developing markets such as China, for example. And Poussot says he's on the lookout for small acquisitions that will boost Wyeth's product offerings across all its businesses. "Innovation doesn't have to be prescription only," Poussot says. He disputes the idea that his company needs to get big fast in order to keep predators at bay. "What matters is to continue to grow," he says.

In a business as risky as pharmaceuticals, it also helps to be lucky. Just weeks before Witty took over at Glaxo, the company raised $9 billion in a debt offering—the biggest corporate bond issue the U.S. had seen in six years. "We saw a moment, and we took it. We didn't know the markets were about to slam close," Witty says. Now he is plotting his next move. "I tell you right now this economic shift in the markets has put a lot of pressure on some companies. Great, we have the capacity to do some transactions."

For an in-depth look at Pfizer's prospects as well as views on the economy, M&A, and other pressing issues from four newly minted drug company chief executives, go to www.businessweek.com/magazine.

With Kerry Capell in London

Weintraub is a senior writer for BusinessWeek's science and technology department.