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Is Pfizer really weighing a BMS buy?

May 3, 2017
Life sciences

Is Pfizer thinking of buying Bristol-Myers Squibb, as the rumors go? CEO Ian Read hinted at the possibility on Tuesday’s first-quarter earnings call—but investors shouldn’t expect any immediate action, he cautioned.

As Read told shareholders on the call, “we … believe we have the ability, should the opportunity arise and should the value be there, to do a large deal.”

He noted, though, that “certain large companies have significant, almost binary risks … which could immediately alter their values,” which is one reason the company won’t be rushing into anything.

Bristol-Myers, whose status in the immuno-oncology field was compromised last year by a flopped first-line immonotherapy trial in non-small cell lung cancer, certainly fits that bill. Its lung cancer hopes are now resting on a combo of PD-1 med Opdivo and a CTLA-4 drug—an approach that’s not shared by Merck’s rival Keytruda and Roche’s Tecentriq, which are going after checkpoint inhibitor/chemo pairings.

With that in mind, snatching up BMS wouldn’t make a lot of sense for Pfizer “until more clarity is gained on how the battle will shake out between ‘CTLA4 combo’ and ‘chemo combo,’” Bernstein analyst Tim Anderson has written to clients, noting that “having the value of the target change materially for the worse could make management look bad.”

Bristol-Myers’ struggles first ignited merger rumors early this year, and the ever-deal-seeking Pfizer was quick to see its name pop up as a potential buyer. One reason? Despite its partnership with Merck KGaA on avelumab—which recently picked up its first approval, a Merkel cell carcinoma nod, under the brand name Bavencio—analysts say the New York pharma is not necessarily a lock to be a leader in the so-called second wave of immuno-oncology drugmakers.

Read, though, insisted on Tuesday that Pfizer is “committed” to the partnership and remains “focused on developing avelumab”—though he also acknowledged that backing out of the deal wouldn’t be a megadealbreaker.

“I don’t think that any type of breakup fee would be material compared to the size of a large deal,” he said, suggesting a potential BMS buy would trump walking out on Merck.

Questions surrounding the combo approach aren’t the only factor holding up Pfizer’s dealmaking activity, though. Read listed uncertainty around U.S. tax reform and even the French election as reasons to stay put for now—a stark contrast to the company’s last earnings call, on which the Pfizer chief insisted it would “continue to do BD where we see value for our shareholders” instead of taking a “dramatic pause” to wait and see “what the tax code’s going to do.”

The way Goldman Sachs analyst Jami Rubin sees things, that business development is all the more important in light of Pfizer’s first-quarter performance, which saw some key meds fall short of estimates. In a note to clients, she pointed in particular to Xtandi, whose $131 million in sales is “clearly weak given [Pfizer] paid $14 billion for this asset,” and Xeljanz, which came in $38 million behind consensus, writing that the misses raised “concerns about Pfizer’s ability to grown in the absence of M&A in our view.”

Pfizer, for its part, attributed part of the revenue miss to a selling period slightly shorter than last year’s, which it said took $300 million off its $12.79 billion revenue tally. And despite the time crunch, it was able to best forecasts with breast cancer-fighter Ibrance, which raked in $679 million to edge Wall Street’s $672 million prediction.

All eyes are on that drug now that Novartis is out with rival Kisqali, which undercut Ibrance on price. Pfizer’s innovative health president Albert Bourla, though, reminded investors on the call that the company had successfully “managed … price competition in the past, and we will do it in the future.”

Meanwhile, the company managed a beat on the earnings front thanks to lower expenses and a gain on divestments, reporting per-share profits of 69 cents that topped the 67-cent consensus estimate. It also reaffirmed its 2017 guidance, and “and we continue to maintain the numbers are well within reach,” Barclays analyst Geoff Meacham wrote in an investor note.

By Carly Helfand

Source: Fierce Pharma

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