JPM17: Surprise! Pfizer is Still Deal Hungry for M&As After Medivation

JPM17: Surprise! Pfizer is Still Deal Hungry for M&As After Medivation January 12, 2017
By Mark Terry, Breaking News Staff

With the JP Morgan Healthcare Conference ongoing in San Francisco, there’s always the expectation of a few major surprises. And if not major surprises, perhaps some insight. Keith Speights, writing for The Motley Fool, highlights three “surprises,” from the Pfizer ’s presentation yesterday, although “surprises” may be too strong a word.

1. Pfizer plans to keep buying.

Since the company was ready to drop $160 billion on Allergan less than a year ago before the deal collapsed, they presumably have plenty of cash and credit ready to spread around, despite a few big buys in 2016. One of the notable acquisitions, for which Pfizer has been criticized for overpaying, is its $14 billion acquisition of San Francisco’s Medivation in August. In June 2016, it acquired Anacor Pharmaceuticals for $5.2 billion. Prior to that, the biggest transaction was its acquisition of Hospira in late 2015.

Speights writes, “Throwing in a few smaller transactions, including the purchase of part of AstraZeneca ’s antibiotics business, Pfizer has spent roughly $38 billion in acquisitions in a relatively short period. If you think the big pharmaceutical company is done with making acquisitions, think again, Pfizer CFO Frank D’Amelio said at the JP Morgan conference that the drugmaker is still looking to make more deals.”

Although Pfizer’s lips remain sealed on the who, what, where and when—and how much—just yesterday Todd Campbell, writing for The Motley Fool, predicted that three hot cancer biotech companies were likely to be on the market this year: Array BioPharma , Seattle Genetics , and Exelixis .

2. “We love Trump.”

Speights does admit that none of the Pfizer executives actually said that. What they have indicated, however, is that some of Trump’s corporate tax proposals as well as House Speaker Paul Ryan, are promising. Trump has proposed a 15 percent corporate tax rate and Ryan a 20 percent tax rate. There has also been talk of a lower tax on overseas cash repatriation. That was done once in 2004, allowing U.S. multinational companies to repatriate foreign profits at a 5.25 percent tax rate. Businesses and investors argued that it brought in $362 billion into the U.S. economy, which, however, were used primarily to pay investor dividends. When it was proposed again in 2011, Senate Democrats published a report indicating the tax holiday had cost the U.S. $3.3 billion in lost tax revenue and that companies that received the tax break cut over 20,000 jobs afterwards.

It’s also interesting that the same day Pfizer execs expressed positive feelings over potential Trump policies, the President-elect at his first press conference in six months commented, “There’s very little bidding on drugs. We’re the largest buyer of drugs in the world. And yet we don’t bid properly. We’re going to start bidding.”

Pfizer took a bit of a hit shortly afterwards and hasn’t recovered yet. Shares traded on January 10 for $33.42, and dropped to a low of $32.51 late yesterday. They are currently trading for $32.83.

Anthony Mirhaydrai, writing for InvestorPlace, noted, “Pfizer Inc shares were knocked down as Trump singled out drugmakers as taking advantage of the American people with overly high drug costs despite the high volume of purchases. He pledged to improve the bidding process, forcing drug companies to potentially compete for Medicare business.”

3. Not worrying over Ibrance competition.

On the surface, at least, Albert Bourla, head of Pfizer’s innovative health business segment, didn’t act concerned that Novartis and Eli Lilly seemed to be breathing down their neck in the CDK inhibitor market. Pfizer’s fastest-growing drug last year was Ibrance, which generated $1.5 billion in the first three quarter of 2016. In October 2016, Novartis revealed data from a late-stage trial of ribociclib in combination with hormone therapy Femera to treat advanced breast cancer with positive results.

Speights writes, “You’d think that Pfizer might be at least a little afraid of ribociclib presenting a threat to Ibrance. Novartis stopped the late-stage study in May, earlier than planned, after interim analysis showed the drug had already met its primary endpoint. Lily, on the other hand, didn’t get much good news in its interim analysis of abemaciclib.”

Bourla seemed to argue that Novartis and Lilly’s data only made the CDK inhibitors more attractive as a class.

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