Deal-Hungry Pfizer Unlikely To Make Fresh Bid For AstraZeneca PLC

November 14, 2014

By Mark Terry, BioSpace.com Breaking News Staff

Back in May 2014, Pfizer Inc. ’s $119 billion bid for British drug company AstraZeneca fell apart, when a six-month cooling-off period required by British law saw the U.S. Treasury Department change regulations making it more difficult for companies to take part in tax inversions. As Pfizer was interested in the company partly to shift its tax domicile to the U.K. and decrease its corporate tax load, the changes put the kibosh on any agreement.

Now, with the end of the cooling off period coming to an end, analysts and investors are speculating on whether Pfizer will take another shot at AstraZeneca or look elsewhere. “I’m pretty sure that no one at AstraZeneca is ready to agree to a friendly deal,” said an unnamed banker in a Reuters article today. “The hurdles are now getting bigger and bigger. A deal would take longer and would be more expensive. In that context, Actavis is becoming more attractive, although it would not be a great story.”

Despite the tougher U.S. regulations against tax inversions, Pfizer’s Chief Executive Officer Ian Read indicated to analysts in October that he still wanted to decrease the company’s taxes. “We still believe that on a case-by-case basis there is meaningful value to be had from inversions.”

That may be true, but AstraZeneca is probably not going to be the target. “I would not put it at more than a 20-30 percent probability,” said Norbert Janisch, a portfolio manager at Raiffeisen Capital Management in Vienna, in a statement.

In October Pfizer announced a stock repurchase plan of $11 billion in conjunction with a previous $1.3 billion share repurchase program. Analysts suggested that this was an attempt to strength the company’s stock value. “The 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.” Analysts also indicated that many of Pfizer’s patents are ending, making it more vulnerable to inexpensive generics, and has a relatively weak pipeline of experimental medicines.

There has been talk that Pfizer might attempt to acquire UK-based GlaxoSmithKline (GSK) or Dublin-based Actavis (ACT). On July 1, Actavis closed a $28 billion takeover of Forest Laboratories Inc., which gave the merged companies a $59 billion market value. This would make a Pfizer acquisition eligible for inversion.

Also, in the interim, AstraZeneca announced in August a collaboration agreement with Illumina, Inc. , to develop its next generation sequencing (NGS) platform for companion diagnostics that would be applicable across AstraZeneca’s oncology portfolio.