April 13, 2016
By Mark Terry, BioSpace.com Breaking News Staff
Now that the Pfizer-Allergan deal is officially dead, investors are speculating on Pfizer ’s future course of action. Will it make other deals? Continue on with business-as-usual? Or maybe even split into two companies.
Only a day after the deal was called off, Allergan announced it had entered into an agreement with Heptares Therapeutics, a wholly-owned subsidiary of Sosei Group Corporation, that could hit $3.3 billion. So what’s Pfizer going to do?
One possibility is break into multiple companies. The original plan after the Pfizer-Allergan merger was, in about a year, to break the merged companies into two, one focused on research and development and new drugs, the other to focus on mature branded products and drugs facing patent expiration. That’s still a possibility.
But what most investors seem more interested in is a possible acquisition. Although a tax-inversion deal might be tougher due to the new U.S. Treasury Department rules, that doesn’t mean Pfizer won’t make strategic acquisitions whose goal is something besides saving on taxes.
“The market has naturally assumed that with the deal off, [Pfizer] is desperate and must be suddenly on the hunt again,” Tim Anderson, an analyst with Sanford Bernstein told Bidnessetc. “This may not necessarily be the case.”
Most think Pfizer will, though. A European-based tax-inversion deal isn’t out of the question, but would probably require more complex maneuvering on the part of attorneys, also with the fear that the U.S. government will write more rules to scuttle such a deal.
So if Pfizer were to head out for a spring/summer shopping trip? One possibility would be Shire plc , which might offer an inversion deal. Strategically, Shire has a strong pipe of rare disease drug candidates. Pfizer also has 10 rare disease pipeline candidates for diseases like Duchenne Muscular Dystrophy, sickle cell anemia, and hemophilia.
Earlier this month, Anderson wrote in a research note, “If Pfizer remains hell bent on inverting but cannot make the deal with Allergan work, it could theoretically even revisit AstraZeneca or approach GlaxoSmithKline .”
Both those companies seem incredibly unlikely, given how adamantly opposed the UK government was to such a deal the first time around. When Pfizer was attempting to acquire AstraZeneca in 2014, the U.S. government was nibbling around the edges of its tax-inversion rules to prevent the deal, but the UK government was threatening to extend what is called a public interest test as part of The Enterprise Act.
As described in an article in The Telegraph, “The Enterprise Act allows UK competition authorities to intervene in international takeovers but only in deals concerning national security, media plurality and financial stability issues.”
A number of attorneys felt that The Enterprise Act applied to the Pfizer-AstraZeneca deal was outside the European Commission’s powers. However, David Cameron, the UK Prime Minister, indicated he would do “what is right for Britain” regarding that deal.
Of course, Pfizer wouldn’t have to go after a mega-deal. There are plenty of smaller pharmaceutical and biotech companies out there that would strengthen Pfizer’s portfolio in a number of different areas. Ironically, some of those companies might be the target of Allergan.
Investors have speculated on Allergan taking a shot at Canadian firm Valeant Pharmaceuticals International , or at least its Bausch & Lomb unit, which might be up for sale. Other companies floated have been Cambridge, Mass.-based Biogen , North Chicago, Ill.-based AbbVie , Celgene , or Bristol-Myers Squibb . Some of those might be of interest to Pfizer as well.
