SAN FRANCISCO (MarketWatch) -- Pfizer Inc. is close to an agreement to acquire rival drug maker Wyeth for $68 billion in a cash-and-stock deal that could be announced as early as next week, the Wall Street Journal reported.

Pfizer PFE, -0.60% , the world's largest drug maker, was racing late Sunday to secure financing for the acquisition and close the deal before the U.S. markets opened Monday, the Journal reported in its online edition, citing people familiar with the matter.

The pharmaceuticals giant has been in discussions with banks over a package of about $25 billion in bank loans for the transaction, and plans to use stock and its cash reserves to fund the rest of the deal, the report said.

Pfizer is expected to offer Wyeth WYE shareholders $50.19 per share, paying $33 a share in cash and 0.985 a share in Pfizer stock, according to the people. That would be a 29% premium over where the shares closed on Thursday before the Journal reported that the two were in talks.

Wyeth Chief Executive Bernard J. Pousso and his management team are not expected to remain with the company after the takeover, according to one person close to the deal. That would put control of Wyeth firmly in the hands of Pfizer Chief Executive Jeffrey B. Kindler, who took Pfizer's helm in 2006.

News of the potential merger sent shares of Wyeth up $4.91, or 12.6%, to close at $43.74 in Friday's session. Pfizer shares rose 24 cents to end the day at $17.45.

The effort by Pfizer represents a high-stakes gambit, since the company has not had a spotless track record in making large acquisitions, the Journal report noted.

The possible mega-merger comes at time when the global pharmaceutical industry is suffering from flagging product development and high fixed costs.

Like other major pharmaceutical firms, Pfizer and Wyeth face the looming expiration of patents on some of their most lucrative products, as well as intense competition from makers of generic drugs.

Pfizer is grappling with the expected loss of patent protection for its blockbuster cholesterol drug Lipitor in 2011. Lipitor makes up 25% of the company's total sales and carries higher-than-average gross margins.

Wyeth, meanwhile, derives about 35% of its sales from innovative biologic drugs and boasts a strong pipeline of new treatments in late-stage development, according to a report from independent investment research firm Morningstar Inc.

"We believe a merger would make sense," Morningstar analyst Damien Conover wrote in a research note published on Friday. He said a transaction would offset the adverse impact on Pfizer from the Lipitor patent expiration and give the combined company several critical biologic products.

In addition, Conover noted that Wyeth has about $14 billion in cash and a smaller dividend payout, which should ease investors' concerns about the viability of Pfizer's dividend.

Yet he cautioned that if Pfizer overpays for Wyeth, the benefits of a merger -- and perhaps the deal itself -- would be in doubt.

"The premium that might be demanded by Wyeth could represent the biggest hurdle for the merger," Conover said. "Negotiations could trail on throughout the year, as neither company needs to complete the deal immediately. However, with the Lipitor patent expiration approaching in 2011, we believe Pfizer would like to put its $25 billion-plus of cash to work well before 2011."

Other obstacles to the merger, he added, include Pfizer's "limited access" to major financing and the "relative cheapness" of Pfizer's shares, which could dilute the transaction's value.

If the deal is approved, several mutual funds stand to benefit from large stakes in Wyeth shares, according to Morningstar. They include Fidelity Select Pharmaceuticals Fund FPHAX, -0.32% , which had committed 7.8% of assets to the stock as of Nov. 30, and Mainstay ICAP Select Equity Fund ICSLX, which had 6.9% of assets in Wyeth stock as of the same date.