Could Pfizer Be Considering a Grab for AstraZeneca’s Cancer Pipeline?

Source: Thinkstock

Source: Thinkstock

Reuters, Bloomberg, and Forbes report that Pfizer, Inc.(NYSE:PFE) – currently the world’s largest pharmaceutical company — has been contemplating a takeover of AstraZeneca, an asthma and heart drugs maker. According to Bloomberg, the two companies are no longer in talks, but sources speculate that Pfizer is still interested and may follow up with another bid for the company.

Sources announced on Sunday morning that Pfizer’s $101 billion takeover offer was rejected by AstraZeneca. Pfizer is supposedly interested in the company for it’s cancer pipeline, which includes a number of a promising yet risky experimental immunotherapy drugs, which boost the body’s immune system in order to fight cancerous tumors.

Pfizer executives also see an AstraZeneca takeover as a way to boost earnings and generate cost savings, according to Reuters, which noted that a deal at a 25 percent premium would boost the company’s earnings almost immediately.

“The consensus AstraZeneca model is hugely dependent on pipeline assumptions, as the base business will deteriorate massively by 2020 as several key products go off patent,” said analyst Mark Schoenebaum, who spoke with Bloomberg. The analyst added that Pfizer shareholders might see more risks than benefits in the deal, given AstraZeneca’s largely experimental pipeline and eroding revenue.

Despite the potential risks, Citi analyst Andrew Baum says he anticipates Pfizer “to push aggressively ahead with the second approach.” In an interview with Reuters, Baum added that there’s a possibility that AstraZeneca may try to reframe a potential deal between the two companies as a merger of equals as a kind of defense strategy.

Should Pfizer succeed in it’s second bid, the acquisition would be among the largest the industry has ever seen, Bloomberg notes, though it would hardly be the company’s first major acquisition. Pfizer has a long history of mega-mergers; in 2009, the company bought Wyeth for $68 billion after previously acquiring Pharmacia and Warner Lambert.

Mark Schoenebaum, who spoke with Bloomberg, added that, “Pfizer has been signaling since last summer that, in theory, the company would not be opposed to a larger M&A deal if the numbers made sense.”

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