Publications
Partners
London - Pfizer may come back to bid for British drug company AstraZeneca after its reported $101bn takeover approach was rejected, since a deal could make sense for the US pharmaceuticals giant as it seeks to build up its cancer franchise.
In addition to adding promising - though still risky - experimental medicines known as immunotherapies that boost the body's immune system to fight tumours, acquiring AstraZeneca could also generate significant cost savings, according to industry analysts.
As a result, a deal at around a 25% premium to the current share price funded by cash, cheap debt and some stock could boost Pfizer earnings immediately, they believe.
Both companies have declined to comment on a newspaper report, which cited senior investment bankers and industry sources saying that Pfizer approached the British pharmaceuticals group about a deal.
The newspaper said no talks were currently under way after AstraZeneca resisted the approach.
Scepticism
Citi analyst Andrew Baum said he believed the report was "very likely genuine" and Pfizer could return to the fray, given the attractiveness of AstraZeneca's pipeline of cancer drugs, its expertise in auto-immune diseases and the scope for taking out costs.
"We anticipate Pfizer to push aggressively ahead with a second approach," Baum wrote in a research note on Monday, adding that AstraZeneca might seek to structure any deal as a merger of equals as a defence strategy.
Pfizer has a long track record of making major acquisitions, with the $68bn purchase of Wyeth in 2009 its last major deal, after earlier acquisitions of Pharmacia and Warner Lambert.
The drugmaker has more recently been divesting certain operations and mega-mergers have fallen out of fashion in the pharmaceuticals industry following scepticism about how well some of them have worked. But Chief Executive Ian Read has said he would still consider a large deal that made sense.
Read also has an incentive to buy assets overseas rather than in the United States since Pfizer has tens of billions of dollars accumulated through foreign subsidiaries, which if repatriated to the US would be heavily taxed.
A Pfizer move on AstraZeneca might flush out other bidders.
US biotech giant Amgen already has a tie up with AstraZeneca in auto-immune medicines to treat diseases like psoriasis and severe asthma.
Novartis and larger GlaxoSmithKline have also been mentioned in the past as potential suitors, although GSK has in recent years said publicly it was not interested in making a large acquisition, while Novartis is in the middle of strategic review and already has a presence in cancer immunotherapy.
