BackPfizer said to have held now-dormant talks to buy AstraZeneca
Pfizer held informal, now-discontinued talks with AstraZeneca about possibly buying the latter, according to sources
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New York: Pfizer Inc., the world’s biggest drug maker, held informal, now-discontinued talks with AstraZeneca Plc about possibly buying the London-based maker of asthma and heart drugs, according to two people familiar with the matter.
The companies aren’t currently negotiating, said the people, who asked not to be identified, with one specifying that the discussions happened several months ago and there are no plans to resume. The talks were first reported on Sunday by London’s Sunday Times, whose unnamed bank and industry sources said New York-based Pfizer made a tentative approach about a takeover valuing AstraZeneca at more than £60 billion ($101 billion).
If the idea is revived, an acquisition of AstraZeneca would be among the industry’s largest ever. Pfizer has reorganized its business over the past three years, shuttering some research projects and emphasizing others. A deal with AstraZeneca would add early stage pipeline drugs in a promising new field of cancer treatments that use the body’s own immune cells to recognize and attack cancers.
“We don’t comment on market speculation or rumours," Andrew Topen, a Pfizer spokesman, said in an email.
Esra Erkal-Paler, a spokeswoman for London-based AstraZeneca, declined to comment.
Shares in Astrazeneca Pharma India Ltd gained as much as 6.5% on Monday after the Sunday Times report. Astrazeneca holds a 75% stake in its Indian subsidiary, the BSE data shows.
Pfizer’s stock has gained about 35% in the last two years, benefiting from the revamping that focused it into three main units: two units for new drugs, and one for older products.
AstraZeneca treatments
AstraZeneca in January announced an agreement with Immunocore Ltd to develop the new cancer treatments that use the body’s own immune cells, and it also has several of its own immune-based drugs being tested in multiple cancers. The company’s shares have risen about 32% over two years, even as sales have fallen from $33.6 billion in 2011 to $25.7 billion last year, with further losses projected by some analysts as drugs lose patent protection.
“While a deal would be highly accretive through cost cutting," Pfizer shareholders may have doubts about AstraZeneca’s pipeline as well as its eroding revenue, said Mark Schoenebaum, an analyst with ISI Group Llc.
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, he said in a note to clients.
Mega-mergers
A merger of this reported size would top Pfizer’s 2000 purchase of Warner-Lambert Co. for $87 billion, the industry’s largest deal, according to data compiled by Bloomberg. Pfizer has been at the center of the biggest drugmaker mega-mergers, making up three of the 10 deals worth more than $30 billion in the last two decades.
It would also provide a use for Pfizer’s cash from profits that have been stashed overseas instead of being brought back to the US, where they would be taxed at a higher rate. Pfizer had $69 billion in untaxed cash overseas as of last month, according to data compiled by Bloomberg.
A purchase of AstraZeneca could also potentially allow Pfizer to move its tax domicile to the UK through a so-called inversion transaction, a move that has allowed other US drug makers to lower their tax bill.
AstraZeneca rose 0.6% to close at 3,781.50 pence on 17 April, giving the company a market value of £47.7 billion. Pfizer shares 0.5% to $30.25 the same day. Both nations’ stock markets were closed for a holiday on 18 April.
Merger comments
Since taking over in 2010, Pfizer chief executive officer Ian Read’s answers to whether or not he would pursue a mega-merger such as a deal with AstraZeneca have shifted.
On a January conference call in 2012 he said, “I’m very disinclined to be looking at any possibility of another mega-acquisition. You never say never, but we have all of the science we need."
In July 2013, when Read was asked on another conference call about the size of deals he might pursue, he replied: “We’ll look at any type of acquisition—never say never to a larger acquisition that made sense."
Schoenebaum said there were signs Pfizer could pursue a large target. 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, Schoenebaum said. Bloomberg
Reuters contributed to this story.
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