Pfizer's $11 Billion Buyback Dims Prospects Of AstraZeneca PLC Bid

Pfizer's $11B Buyback Dims Prospects Of AstraZeneca Bid

October 24, 2014

By Mark Terry, Breaking News Staff

After apparently abandoning its acquisition of London-based drugmaker AstraZeneca , biopharma conglomerate Pfizer announced a stock repurchase plan of $11 billion last week, in conjunction with a recent $1.3 billion share repurchase program.

New York-based Pfizer has a market valuation of approximately $180 billion. The board of director’s indicated the fourth quarter dividend would be 26 cents on the company’s common stock, payable Dec. 2, 2014.

Rumors have swirled about other potential acquisition targets by Pfizer ever since the AstraZeneca deal looked to be in jeopardy. Berenberg Bank speculated that the company might try to acquire UK-based GlaxoSmithKline . Other analysts speculated Pfizer might bid on Actavis .

The AstraZeneca deal was a tax inversion deal, in which Pfizer would have acquired the company, then moved Pfizer headquarters to the U.K. in order to benefit from the country’s lower corporate tax rates. But the deal fell apart on news of the U.S. Treasury Department’s announced crackdown on these types of acquisitions.

Analysts suggest that Pfizer’s stock buyback plan is to bolster its 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.”

The company’s share prices increased by 1.4 percent after the announcement on Thursday. Overall the company’s stock has declined by 6.6 percent this year. It’s noted that without the AstraZeneca acquisition — or any acquisition — Pfizer is reporting almost flat revenue growth from its portfolio of patent-protected drugs.

“These 2014 repurchases and planned repurchases are expected to reduce total shares outstanding by approximately 100 million shares by the end of the year after factoring in actual and projected dilution related to employee compensation programs,” the company said in its original buyback in July.

In other news, Pfizer announced yesterday that the U.S. District Court of Delaware upheld its basic patent and the L-malate salt patent covering SUTENT (sunitinib malate) capsules. This will allow Pfizer to continue to exclusively sell sunitinib malate as SUTENT through 2021, when the patent expires. In June 2010 Pfizer sued Mylan Pharmaceuticals, Inc. when Mylan applied to the FDA to market a generic version prior to patent expiration. SUTENT is a targeted oncology medication used to treat gastrointestinal stromal tumor (GIST), advanced renal cell cancer and advanced pancreatic neuroendocrine tumors.

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