May 22, 2015
By Riley McDermid, BioSpace.com Breaking News Sr. Editor
The speculation surrounding which big deal Pfizer Inc. is likely to do in this white hot market reached another level Friday, after Mylan Executive Chairman Robert Coury said he viewed Pittsburgh, Penn.-based Mylan Inc. as a good fit for Pfizer if his company is successful in buying smaller generic drugmaker Perrigo Company .
Pfizer has been besieged by rumors over the last two weeks that it will make a big M&A move soon, with analysts pushing it to consider buying struggling GlaxoSmithKline , which would double its portfolio and make it an instant pharma powerhouse.
But now, new contenders are throwing their hats in the ring: Coury suggested in a recent meeting with shareholders that a Mylan-Perrigo combination sweet deal for Pfizer Inc., particularly because Pfizer could move its address abroad, reaping lucrative tax benefits.
There’s been over $92.5 billion of U.S. healthcare merger activity already in 2015, as healthcare and biotech have boomed over the last 13 months. Executives at all these companies have scrambled to keep up with the 73 percent more M&A activity this year, which has already seen more than 245 deals.
Pfizer hasn’t been sitting entirely on the sidelines. It bought generic injectables firm Hospira, Inc. in February for $16.8 billion and has said it is actively in the market for other smart deals. Indeed, Pfizer has done more deals than any other large pharmaceutical company. That aggressive pursuit DNA led Pfizer to take an unsuccessful run at acquiring British drugmaker AstraZeneca PLC for $119 billion—but that bid, too, fell apart, leaving Pfizer with a stack of cash and frustrated aspirations.
Pfizer Chief Executive Officer Ian Read has said in the past that he is dedicated to building out the company’s businesses via “bolt-on” acquisitions or even wholesale takeovers.
“Certainly I feel a sense of urgency on utilizing our balance sheet and our capital to do deals that are incremental, add incremental value and certainly add revenue growth in the innovative space,” said Read on a conference call with analysts in October. “We are aggressively looking at all alternatives.”
The idea that Pfizer may buy something major soon came as no surprise to analysts.
“We believe that other significant acquisitions are possible, though more likely to be aimed at [Pfizer’s innovative-pharma side of the company],” Jeffrey Holford, a biotech analyst for Jefferies Group, wrote in a report Thursday. Holder, however, believes Pfizer is better suited to yet another company, Shire , both for its Irish tax address and its complementary portfolio.
As for Coury, he has plenty on his plate right now without courting a Pfizer bid. The complicated three-way takeover waltz being conducted between Mylan Pharmaceuticals, Inc. , Israeli company Teva Pharmaceutical Industries Ltd. and Perrigo Company (PRGO) took another weird turn last week, after Mylan said that while it still views Teva’s unsolicited $40.1 billion bid as too low, it might want to acquire Teva itself eventually.
Earlier this month Mylan made an unsolicited $28.9 billion bid for Perrigo, a move which Wall Street has taken as a catalyst for Teva to pounce before Mylan becomes a larger, and much more expensive, target. But Perrigo Company rejected that offer almost immediately, saying it “substantially undervalues” Perrigo and “its future growth prospects and “is not in the best interests of Perrigo’s shareholders.”
Now, however, the landscape is changing. Coury made it clear at the same meeting that if Mylan is able to cement its deal with Perrigo, it might go shopping again—and this time to buy Teva, not be bought.
“We were just saying in a hypothetical situation, if it ever were to happen after all these other things, the only way it could happen is with us,” Mylan Chief Executive Officer Heather Bresch said at the time.
Meanwhile, the speculation surrounding a possible bid from Pfizer Inc. (PFE) for struggling GlaxoSmithKline is heating up, after one closely-watched biotech analyst said in a note this week that Pfizer buying the company would “unlock access to its balance sheet and improve its tax situation.”
Gregg Gilbert, a biotech analyst at Deutsche Bank , wrote in a note to investors “Introducing PfizerKline” that he thinks a deal would be “materially accretive” for both companies.
“We believe that the company has a sense of urgency to create value by leveraging the power of its balance sheet to do needle-moving deals,” Gilbert wrote. “Since media reports in the past have pointed to the potential for a Pfizer/GSK combination, we are revisiting that theme.”
Gilbert estimated that a bid priced at $29.86 a share, via half stock and half cash, which would push up Pfizer’s earnings per share by 10 percent to 16 percent beginning in 2016.
That sentiment appears to be universally held across the biotech community. Two weeks ago we asked our readers, with cash to burn, will Pfizer go hunting for Glaxo?
BioSpace readers certainly believe that deal-hungry Pfizer Inc. (PFE) will make a bid for competitor GlaxoSmithKline (GSK), and that bid will come in the third quarter of this year and be priced in the not insignificant $120 billion or more range.
Almost a year after its $119 billion offer for AstraZeneca PLC (AZN) fell apart in the face of massive opposition from regulators and internal dissent, global drugmaker Pfizer Inc. (PFE) is once again being floated as a potential buyer of another marquee-name British pharmaceutical company: GlaxoSmithKline (GSK).
Now, we know what you think: That 63 percent of 500 respondents do think Pfizer will make some sort of bid for Glaxo, though 37 percent of those were not as sure.
In addition, 48 percent of those polled said they believed Pfizer would tender its offer during the third quarter of 2015, 39 percent said the fourth quarter, and 13 percent said the second quarter.
The most astonishing metrics were in the potential bid price, however: 35 percent of respondents thought Pfizer would offer more than $120 billion for Glaxo, while 26 percent said the price tag would be over $150 billion, 25 percent thought more than $110 billion, and 14 percent said the bid wouldn’t be more than $110 billion.
The argument for a Pfizer/Glaxo marriage had Wall Street ruminating last month.
A column in The Telegraph last week that while some market watchers might consider such an audacious bid “bonkers,” there are plenty of reasons deal-hungry Pfizer might want to merge with Glaxo.
First, Pfizer is still desperate to do a big deal. The company has tens of billions of pounds sitting dormant in overseas subsidiaries, cash that it cannot repatriate to America without being hit by a colossal tax bill,” wrote columnist Ben Markow.
“In addition, it needs access to a bigger pipeline of new medicines. Patents on many of its top-selling drugs are expiring, including Viagra — leaving the products open to competition from generic rivals.”
Markow said that secondly, that Glaxo, despite its market cap, “looks vulnerable to a bid.”
“Although, at £75 billion, it is safely out of the reach of most in the pharma industry, it is less than half the size of Pfizer, Roche and Novartis AG (NVS). Although a stretch, such beasts could still conceivably swallow Glaxo,” he wrote.
“One consequence of Pfizer’s bid for Astra, and a string of other bumper takeovers both before and since, is that suddenly almost any deal looks plausible.”
Recent history bolsters Markow’s theory. Pressure from internal decision makers at Pfizer Inc. (PFE) pushed Read to Teva at the end of 2014 about a possible merger, people familiar with the matter told Bloomberg News at the end of January, but that bid was immediately rejected.
The majority of the respondents in this week’s poll were from the United States, with 78 percent of the 500 participants based in America. The rest hailed from a host of countries including Belgium, Germany, France, Canada, Switzerland, the United Kingdom, Australia, Puerto Rico, Montenegro, Brazil, Egypt, Colombia, Romania, Lithuania, Japan, Ireland, Israel, Greece, India, Thailand, Switzerland, the Netherlands and Singapore. Three percent of respondents declined to identify their country of domicile.
For states, California led the pack, with 17 percent of the poll’s respondents based in that state. Pennsylvania followed with 12 percent, then New Jersey at 10 percent. The rest were distributed throughout the U.S.
Will Mylan Buy Teva, As Predator Becomes Prey?
The complicated three-way takeover waltz being conducted between Pittsburgh, Penn.-based Mylan Inc., Israeli company Teva Pharmaceutical Industries Ltd. and Perrigo Company took another weird turn last week, after Mylan said that while it still views Teva’s unsolicited $40.1 billion bid as too low, it might want to acquire Teva itself eventually. Mylan Chairman Robert J. Coury made it clear that if Mylan is able to cement its deal with Perrigo, it might go shopping again—and this time to buy Teva, not be bought. With dealmaking heating up in 2015, we wanted to know your thoughts: Will perennial predator Teva wind up being prey?
