Neil Woodford, the fund manager, sees a 50/50 likelihood that Pfizer will take another pop at AstraZeneca once the six-month “hands off” period expires in a week’s time. That ratio feels too high.
First, the Pfizer-related reasons. The US pharmaceuticals group offered £55 per AstraZeneca share in the spring but may have been relying on its tax “inversion” plans to make its numbers stack up. Such tax flips have not been outlawed by the US administration (just made harder) but any new offer might have to structured more like a merger than a takeover to meet the revised rules.
An all-share deal in which AstraZeneca’s investors were offered 40% ownership of a new company might qualify, think investment bankers. But that would currently value the UK company at £60-ish. It would be tricky for Pfizer to explain to its own shareholders why it is suddenly prepared to pay so much more.
Pfizer’s management may also be looking in other directions. On Monday the US firm paid $850m (£544m) for rights to a cancer immunotherapy drug being developed by Merck. The sum is peanuts for a company the size of Pfizer. But the deal would still be odd if a fresh assault on AstraZeneca, whose development pipeline is loaded with potential cancer treatments, is being contemplated.
Then there’s the career-risk in making another tilt at AstraZeneca. Pfizer boss Ian Read’s credibility would be shattered if he failed twice to pull off the same mega-deal. Nor can Read know how intense the UK political heat would be this time – except that for the next few months, in the run-up to a general election, it would be red-hot.
Then there are the AstraZeneca-related reasons. Tuesday’s detailed presentation to investors was not a just-in-case defence document, but it might as well as have been. There were few surprises but chief executive Pascal Soriot stuck to his big targets – a return to sales growth in 2017 and a jump in revenues of 75% to $45bn by 2023. Some eight-to-10 new drug approvals are expected next year; if those arrive on cue, the momentum should still be with AstraZeneca.
As Woodford says, the value of a drug pipeline is “impossibly difficult to model with precision.” Judgment is required and his opinion is that “the long-term value that lies in AstraZeneca’s pipeline remains overwhelmingly positive.”
It is conceivable that Pfizer might reach the same conclusion, reflect that it got close last time, and have another crack at a takeover. Anything is possible in a pharma-land still gripped by deal-fever.
In the US, Allergan, the Botox company, this week agreed to sell itself to Actavis for $66bn, or roughly double its stock market valuation at the start of this year. If that’s an accurate yardstick of value, AstraZeneca might be considered a snip at £60 a share or more, even against the current price of £46.85.
On balance, though, it’s odds against a repeat attempt. Woodford says 50%, but 20%, at most, feels nearer the mark.
By Nils Pratley