Sector News

Deal-hungry Pfizer will likely overpay for M&A, analyst predicts

October 17, 2016
Life sciences

With its decision not to split up made and its Allergan deal scuttled, Pfizer’s biggest catalyst for growth down the line may come in the form of more M&A. But it’s a risky time to be counting on buys, according to one analyst.

“Whilst management may find attractive targets to acquire, we believe that the environment for M&A is very competitive right now and there is a high risk that Pfizer may overpay for assets,” Jefferies analyst Jeffrey Holford wrote in a research note seen by Investor’s Business Daily.

A Pfizer spokeswoman declined to comment on the note.

Pfizer’s already experienced–and prevailed over–some of that fierce competition. In August, it beat out a slew of reportedly interested drugmakers–including Amgen, Gilead, Celgene, Novartis, AstraZeneca and Sanofi, which had already made a public hostile bid–for cancer drugmaker Medivation, agreeing to shell out $14 billion to seal the deal.

And some industry watchers might argue that that move constituted Pfizer’s first overpayment. At $81.50 per share, the price topped analyst estimates of a “best-case” deal for Medivation, coming in at 180% more than Medivation’s stock price when deal talk first began. “This is a hefty bid,” Bernstein analyst Tim Anderson wrote at the time. And it could take years to fairly judge on whether that bet paid off, with some of that premium accounting for the potential of a closely watched PARP drug that’s still in Medivation’s pipeline.

It hasn’t been all that long since Pfizer thought it’d be taking on a whole new look. Last November, it agreed to a record-breaking $160 billion pact to pick up Allergan–a move that would bolster the company’s innovative products division ahead of a potential two-way break-up.

But the U.S. Treasury spoiled that plan in April, and a few months later, the pharma giant announced the company divide wasn’t happening, either.

And the way Holford sees it, Pfizer’s now in the lurch. Sure, it has a pair of hot sellers in breast cancer drug Ibrance and vaccine star Prevnar 13, which have been posting red-hot growth numbers over the past several quarters. But in the case of Ibrance, “recent prescription trends indicate that the U.S. opportunity is becoming saturated,” and stiff competition–from Novartis and Eli Lilly–is on the way. And Prevnar has similarly already penetrated its U.S. adult market, he noted, as he downgraded Pfizer’s stock.

Of course, Pfizer’s no newbie when it comes to dealmaking, and Medivation’s deal proxy shows that it was the New York drugmaker’s strategy–in addition to its price–that helped it take home that prize. Just days after Medivation brought in investment bankers to advise on a sale–and before Sanofi went public with its own bid–a Pfizer SVP got in touch, helping set his company up for victory months in advance.

By Carly Helfand

Source: Fierce Pharma

comments closed

Related News

January 29, 2023

Colorcon, Inc. signs Put agreement with intent to acquire controlled atmosphere packaging specialist Airnov Healthcare Packaging

Life sciences

Airnov provides critical healthcare industries with high-quality, controlled atmosphere packaging, to protect their products from moisture and oxygen. The business has manufacturing facilities in the USA, France, China and India and employs around 700 people.

January 29, 2023

Takeda pledges up to $1.13B for rights to Hutchmed’s cancer drug fruquintinib outside of China

Life sciences

Takeda of Japan has partnered with Hong Kong-based Hutchmed, gaining the commercial rights to colorectal cancer drug fruquintinib outside of China for $400 million up front, plus $730 million in potential milestone payments. Takeda also will help develop fruquintinib, which can be applied to subtypes of refractory metastatic colorectal cancer, regardless of biomarker status, the companies said.

January 29, 2023

Vir taps Bayer dealmaker Marianne De Backer as its next CEO

Life sciences

On April 3, Scangos, who’s been chief executive officer at Vir since the start of 2017, will hand over the reins to Marianne De Backer, Ph.D. De Backer comes over from Bayer, where she currently heads up pharmaceutical strategy, business development and licensing. Alongside her CEO appointment, De Backer is set to join Vir’s board of directors, the company said Wednesday.

How can we help you?

We're easy to reach