Pfizer casting elsewhere for overseas M&A?
A series of positive pipeline updates could make the asking price for AstraZeneca (AZ) very steep if Pfizer makes another takeover attempt in November.
Facing that situation - and likely continued staunch resistance from AZ - Pfizer may be casting its net elsewhere in its attempts to find an overseas acquisition, with a Bloomberg report indicating that Actavis may be a target.
Pfizer is under pressure on the back of a somewhat lacklustre R&D pipeline, and wants to cut a deal with a foreign drugmaker that would flesh this out, provide opportunities for cost-cutting and - crucially - allow it to tap into the growing trend for the increasingly controversial inversion deals that allow companies to bypass high US corporation tax rates.
Pfizer announced it was drawing back from a formal offer for AZ in May after proffering a £69.5 billion bid which was rejected by the UK drugmaker as being too low, given its bright pipeline prospects.
As if to reinforce that view, in the intervening weeks AZ has announced positive data on several cancer, respiratory and antibiotic drug candidates, unveiled the plans for its new R&D site and corporate headquarters and spent up to $2.1 billion on licensing deals in asthma and chronic obstructive pulmonary disease (COPD) with Almirall and Synairgen.
Add in the end of a federal investigation that had been holding back prospects for antiplatelet drug Brilinta (ticagrelor) - another blockbuster in waiting - and a shorter regulatory path to approval for gout drug lesinurad and it is unsurprising that AZ's stock is riding high at the moment.
The company's share price is now starting to approach the level of the spike seen when rumours of Pfizer's interest first emerged in late April.
Bloomberg cites analyst Odile Rundquist of Swiss investment firm Helvea SA as suggesting that a Pfizer takeover of AZ "will never go through, because it is too expensive" and, despite the positive news flow, AZ's pipeline remains "too experimental".
Other analysts - including Vamil Divan of Credit Suisse - have suggested Pfizer will come back to the table with another £3-£4 per share on top of the earlier offer as the tax benefits would outweigh the additional cost.
There is a chance, theoretically, that Pfizer could announce an offer for AZ as early as this month, although under UK takeover rules that would hinge on AZ inviting Pfizer to the negotiation table, which seems highly unlikely.
Actavis has also been growing by acquisition and last month closed a $28bn acquisition of Forest Laboratories. That deal makes Actavis big enough to allow Pfizer to change its tax domicile to Ireland if it were to acquire the company.
There has also been speculation that Pfizer may switch its attention to AZ's UK rival GlaxoSmithKline (GSK), although analysts have suggested the latter is not such a good fit. Pfizer would like to build its position in cancer therapeutics, and GSK has been reducing its position in that category after selling a clutch of oncology drugs to Novartis.
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Links
Obama goes public on tax inversion loophole
Pfizer declares end to AZ bid...for now
AZ to pay up to $2 billion for Almirall respiratory franchise
Novartis and GSK's multi-billion dollar swaps to transform both companies
