Sector News

Pfizer has $33B and the M&A world at its feet

January 26, 2015
Life sciences
Pfizer, which spent much of last year trying to acquire U.K. giant AstraZeneca, is now sitting on about $33 billion in cash, and the company’s deal pedigree has analysts dreaming of major M&A down the line.
 
As Bloomberg notes, that war chest will certainly be a topic of conversation when Pfizer presents its fourth-quarter and full-year results on Tuesday. But until then–and, likely, afterward–it’s anyone’s guess just what the U.S.’s largest drugmaker plans to do with its money.
 
Dissecting Pfizer’s last major overture, the failed $118 billion bid for AstraZeneca, the company was primarily concerned with two things: a U.K. address that could reduce its tax burden and an entry into the blockbuster world of immunotherapies for cancer. Pfizer made up ground on the latter score largely through a roughly $2.9 billion deal with Merck KGaA signed in November, but it remains stuck with a U.S. tax bill.
 
That means it may make another run at Actavis, an Irish-headquartered company whose price tag just got a lot steeper thanks to a $66 billion acquisition of Allergan. Analysts have also bandied about Mylan, Valeant Pharmaceuticals and even GlaxoSmithKline among potential targets.
 
But changing political winds have made such tax-saving moves, called inversions, more difficult and less lucrative, especially for high-profile companies like Pfizer. And, as Thrivent Financial analyst David Heupel told Bloomberg, the company is unlikely to make a big, risky gambit on a high-dollar target.
 
“They’re looking for strategic assets and they’re taking a pretty broad stroke as to what they’re looking at,” Heupel told the news service. “But I think they’re going to take a diligent and disciplined financial approach, and I don’t think that’s going to equate to a lot of opportunity for them.”
 
By Damian Garde
 

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