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A pedestrian walks past the Pfizer world headquarters in New York.Mary Altaffer/The Associated Press

Pfizer Inc. , the world's largest drug maker, has agreed to buy King Pharmaceuticals Inc. for $3.6-billion in a move to shore up earnings ahead of the looming evaporation of revenue from Lipitor, its biggest product.

Pfizer, which is still digesting last year's $67-billion acquisition of Wyeth, said Tuesday it will pay $14.25 a share for King - representing a 40 per cent premium over King's closing share price Monday.

Pfizer said it expects the transaction to add to its adjusted earnings per share by about 2 cents for both 2011 and 2012 and by 3 cents to 4 cents annually from 2013 to 2015. And it reaffirmed its earnings forecast for 2012.

The company said it expects to generate initial cost-savings of more than $200-million, of which 50 per cent will be realized in the first year, 75 per cent in the second, and 100 per cent in the third year.

Pfizer late next year faces the expiration of the U.S. patent on the cholesterol fighter Lipitor, the world's biggest-selling prescription drug which even amid declining sales will generate global revenue in excess of $11-billion this year. Once a branded drug faces generic competition, it quickly loses upward of 80 per cent of revenue.

The deal will significantly expand Pfizer's presence in the market for pain drugs by adding King's pain portfolio to its own pain products, such as Lyrica and Celebrex.

King will bring Avinza, the Flector Patch and the recently launched Embeda, the first approved opioid pain product intended to discourage abuse. King has other abuse-resistant pain products in development as well.

Opioids - which include morphine, fentanyl and oxycodone - are powerful narcotic drugs that can be highly addictive. That has led companies on the difficult mission of creating drugs that are therapeutic but also difficult to abuse. King is a leading player in the space.

The market for pain relief and management is large and increasing. Physicians in the United States wrote about 320 million prescriptions to treat pain in 2009, Pfizer said.

"King's leadership in new formulations of pain treatments designed to discourage common methods of misuse and abuse will provide Pfizer with multiple new drug delivery platforms, while providing potential long-term upside," the company said.

Frank D'Amelio, Pfizer's chief financial officer, told analysts on a conference call that its acquisition strategy will likely involve "bolt-on" acquisitions in areas such as emerging markets and generic drugs.

Bristol, Tennessee-based King also makes animal health products and specialty pharmaceuticals, including the Meridian auto-injector for emergency drug delivery, and an animal health business that offers feed additive products.

"King's three businesses are not only complementary to Pfizer's businesses, but are also strategically aligned with Pfizer's Primary Care, Established Products, and Animal Health business units, enabling a seamless combination that will maximize King's assets with Pfizer's global organization's scale and resources," the companies said.

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