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 In addition to adding promising — though still risky — experimental
medicines known as immunotherapies that boost the body's immune
system to fight tumors, acquiring AstraZeneca could also generate
significant cost savings, according to industry analysts.
As a result, a deal at around a 25 percent 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 report in the Sunday
Times, 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.
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 autoimmune 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 defense strategy.
Pfizer has a long track record of making major acquisitions, with
the $68 billion 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 skepticism 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 U.S. would be heavily taxed.
A Pfizer move on AstraZeneca might flush out other bidders. U.S.
biotech giant Amgen already has a tie up with AstraZeneca in
autoimmune 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 is not interested in making a large acquisition, while
Novartis is in the middle of strategic review and already has a
presence in cancer immunotherapy.
Mark Schoenebaum, an analyst at ISI, agreed cancer immunotherapy was
likely the main lure for Pfizer, since the field is expected to
become one of the biggest areas of modern medicine in the next few
years.
However, Mark Clark at Deutsche Bank said Pfizer would be making
something of a "leap of faith" since AstraZeneca's most exciting
cancer drugs are still at an early stage of development.
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Pfizer has a highly promising breast cancer drug in late-stage
development called palbociclib but otherwise its cancer portfolio is
relatively weak.
"Notably, Pfizer appears to be nowhere in the important field of
immuno-oncology, which Bristol-Myers Squibb, Roche, Merck & Co and
AstraZeneca currently dominate," Schoenebaum said.
Bristol, Roche and Merck are viewed as being ahead of AstraZeneca in
the new cancer field but the British firm believes it can make up
ground by pioneering drug combinations, including the use of a
medicine known as tremelimumab that it licensed from Pfizer.
AstraZeneca and its rivals will present the latest clinical data on
promising new cancer drugs at the May 30-June 3 annual meeting of
the American Society of Clinical Oncology.
The London market was closed on Monday for Easter but the talk of
Pfizer's interest in AstraZeneca is likely to overshadow dealings
when trade resumes on Tuesday.
AstraZeneca Chief Executive Pascal Soriot, who has been credited for
progress in rebuilding the company's new drug pipeline since taking
over in 2012, fuelling a rally in the shares, will also come under
pressure to address the reported Pfizer approach when he presents
half-year results on Thursday.
Speculation over such a takeover, which would be potentially the
biggest ever foreign takeover of a British company, is likely to
trigger concerns about jobs in Britain's pharmaceuticals sector,
which is viewed as a key industry by the government but which has
been under pressure.
AstraZeneca has already laid off thousands of scientists and other
staff as it shrinks its cost base to cope with a fall in sales due
to patent losses on blockbuster medicines.
With heartburn treatment Nexium losing U.S. patent protection next
month and cholesterol fighter Crestor facing patent expiry in 2016,
the decline in sales is expected to continue for several years.
In an attempt to reshape the company, Soriot is currently moving its
research and corporate headquarters to Cambridge, England. Pfizer
has also made the university city a research hub after shuttering a
large research site in Sandwich, southern England.
The Cambridge connection is only one link between Pfizer and
AstraZeneca, highlighting how the companies know each other well.
AstraZeneca's head of innovative medicines Mene Pangalos also used
to work at Pfizer and the two firms are familiar with each other's
products from working together on projects, such as a pioneering of
a new kind of clinical trial for cancer drugs announced last week.
(Editing by Jane Merriman)
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