Pfizer Not Done With Deals, May Still Break Up After $17 Billion Buy

February 5, 2015
By Riley McDermid, BioSpace.com Breaking News Sr. Editor

Deal hungry Pfizer Inc. may have seen $6 billion in market cap tacked on after it announced a $15 billion acquisition of Hospira, Inc. to bolster its hospital products business, but that’s no guarantee the firm will escape its perennially bad track record with M&A activity, market watchers said Friday—or that it’s done making buys.

Pfizer’s purchase of the injectable drugmaker last week looks like a good bet to analysts, who like the potential it has for a spin off and the more than $800 million in cost savings it could bring to the company.

“I don’t think this deal is a game changer for Pfizer but helps them build out their sterile injectables business without wildly overpaying for assets, as the company has done in the past,” portfolio manager Les Funtleyder of E Squared Asset Management, told Reuters.

But a history littered with failed deals, like the $220 billion lead balloon purchases of Lambert, Pharmacia and Wyeth between 2000 and 2009, have a few Pfizer followers worried.

“The company is, in fact, weighing a breakup in 2017 or later, continuing a pattern set by Chief Executive Ian Read. Since he took the helm in late 2010, Pfizer has sold its infant nutrition business for $12 billion and a pill production unit for $2.4 billion and spun off its animal health business,” wrote Reuters BreakingViews columnist Robert Cyran today. “The company’s stock has doubled over that period, easily outperforming the S&P 500.

But, said Cyran, by 2025, “patents will expire on a huge number of so-called biologic therapies – drugs produced in living cells – prompting the loss of more than $100 billion in annual sales across the industry. Hospira is big in the fast-growing and relatively new business of making non-branded copies of those drugs.”

Indeed, the company has a recent history of failing courtships. Pressure from internal decision makers at Pfizer Inc. (PFE) pushed Read to approach Israeli drug company Teva Pharmaceutical Industries Ltd. at the end of 2014 about a possible merger, people familiar with the matter told Bloomberg News in January, but that bid was immediately rejected.

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.”

That aggressive pursuit 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.

With a current market cap of $50 billion, Teva’s heavy generic drugs pipeline could have been a significant boom to Pfizer, which has a stable of legacy drugs but is likely to be pressured soon by a competitive market for biosimilars. Teva’s portfolio includes a generic drug line estimated to be worth more than $9 billion, including a knock-off of Pfizer’s own blockbuster Lipitor.

Teva also makes generics for perennial antibiotic favorite amoxicillin and well-known blood pressure drug Diovan. Its generics business is so strong that analysts have speculated Pfizer could be looking to spin out its own off-patent medicine company, a consideration it will keep at the forefront while shopping for new deals.

BioSpace Temperature Poll
Will Hiring Heat Up in 2015? With companies as large as Biogen Idec and as small as ICON upping their hiring across the board, where do you think the biotech job market will go in 2015? BioSpace wants your opinion!

” ALT="Pfizer (PFE) Not Done With Deals, May Still Breakup After $17 Billion Buy” NAME="Pfizer (PFE) Not Done With Deals, May Still Breakup After $17 Billion Buy">
February 6, 2015
By Riley McDermid, BioSpace.com Breaking News Sr. Editor

Deal hungry Pfizer Inc. may have seen $6 billion in market cap tacked on after it announced a $15 billion acquisition of Hospira, Inc. to bolster its hospital products business, but that’s no guarantee the deal with escape its perennially bad track records with M&A activity, market watchers said Friday—or that it’s done making buys.

Pfizer’s purchase of the injectable drugmaker last week looks like a good bet to analysts, who like the potential it has for a spin off and the more than $800 million in cost savings it could bring to the company.

“I don’t think this deal is a game changer for Pfizer but helps them build out their sterile injectables business without wildly overpaying for assets, as the company has done in the past,” portfolio manager Les Funtleyder of E Squared Asset Management, told Reuters.

But a history littered with failed deals, like the $220 billion lead balloon purchases of Lambert, Pharmacia and Wyeth between 2000 and 2009, have a few Pfizer followers worried.

“The company is, in fact, weighing a breakup in 2017 or later, continuing a pattern set by Chief Executive Ian Read. Since he took the helm in late 2010, Pfizer has sold its infant nutrition business for $12 billion and a pill production unit for $2.4 billion and spun off its animal health business,” wrote Reuters BreakingViews columnist Robert Cyran today. “The company’s stock has doubled over that period, easily outperforming the S&P 500.

But, said Cyran, by 2025, “patents will expire on a huge number of so-called biologic therapies – drugs produced in living cells – prompting the loss of more than $100 billion in annual sales across the industry. Hospira is big in the fast-growing and relatively new business of making non-branded copies of those drugs.”

Indeed, the company has a recent history of failing courtships. Pressure from internal decision makers at Pfizer Inc. (PFE) pushed Read to approach Israeli drug company Teva Pharmaceutical Industries Ltd. at the end of 2014 about a possible merger, people familiar with the matter told Bloomberg News in January, but that bid was immediately rejected.

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.”

That aggressive pursuit 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.

With a current market cap of $50 billion, Teva’s heavy generic drugs pipeline could have been a significant boom to Pfizer, which has a stable of legacy drugs but is likely to be pressured soon by a competitive market for biosimilars. Teva’s portfolio includes a generic drug line estimated to be worth more than $9 billion, including a knock-off of Pfizer’s own blockbuster Lipitor.

Teva also makes generics for perennial antibiotic favorite amoxicillin and well-known blood pressure drug Diovan. Its generics business is so strong that analysts have speculated Pfizer could be looking to spin out its own off-patent medicine company, a consideration it will keep at the forefront while shopping for new deals.

BioSpace Temperature Poll
Will Hiring Heat Up in 2015? With companies as large as Biogen Idec and as small as ICON upping their hiring across the board, where do you think the biotech job market will go in 2015? BioSpace wants your opinion!