Pfizer's $33 Billion Cash Pile Has Everyone Speculating
January 26, 2015
By Mark Terry, BioSpace.com Breaking News Staff
Continued speculation over potential acquisition targets for Pfizer Inc. have uncovered that the company approached Israeli drug company Teva Pharmaceutical Industries Ltd. late in 2014. In May 2014 Pfizer made a bid for UK-based AstraZeneca PLC for $119 billion that didn’t come together. Ever since, analysts have been speculating on other potential targets.
Unnamed sources indicate that in late 2014 Pfizer communicated with Teva about an acquisition, but was immediately rejected. Teva would make for an interesting partner due to its $9.2 billion generic drugs business. The sources indicated this would be a way for Pfizer to strengthen its portfolio of off-patent medicine and build infrastructure to eventually break out a separate company.
Pfizer has a number of brand name products that have lost their patent protection. The key example is Lipitor. Teva manufactures and markets generic versions of Diovan, for high blood pressure, Plavix, a blood thinner, and the antibiotic amoxicillin.
In January 2015 analysts speculated that Pfizer might make a bid for Chicago-based AbbVie . Other possible targets cited were UK-based GlaxoSmithKline , Dublin-based Actavis plc , and New York-based Bristol-Myers Squibb Company .
The original deal that started all the rumors was for AstraZeneca. It was a so-called tax inversion deal, in which a U.S. company bought a company in a country with a lower corporate tax rate, then moved its official headquarters to that country to take advantage of the lower rate. However, while the deal with brewing, the U.S. Treasury Department changed the regulations, making inversion deals less attractive.
Pfizer has been direct about its interest in another acquisition. In October 2014 Pfizer announced a stock repurchase plan of $11 billion in conjunction with a previous $1.3 billion share repurchase program. “This first signal it sends is they believe that their shares are undervalued,” said John Boris, an analyst at SunTrust Banks Inc., in a note to investors. “The pipeline is not able to offset the continued loss of exclusivity that they’re experiencing.”
Pfizer will be reporting its fourth quarter and fiscal year 2014 reports tomorrow. Analysts expect the company to disclose at least some of their plans with their cash surplus of $33 billion. “They’re looking for strategic assets and they’re taking a pretty broad stroke as to what they’re looking at,” said David Heupel, a healthcare analyst at Thrivent Financial in a statement. “But I think they’re going to take a diligent and disciplined financial approach, and I don’t think that’s going to equate to a lot of opportunity for them.”
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