Sector News

What are the odds? Pfizer-AstraZeneca merger chatter heats up

November 25, 2014
Life sciences
That question seems to be on quite a few minds these days as the oddsmakers assess the chances of another Pfizer megamerger bid for AstraZeneca after the U.K.’s cooling off period ends on Wednesday.
As it stands now, virtually every move–good or bad–made by either company is chalked up as another reason for or against another AstraZeneca bid. Andrew Ward at the Financial Times did a quick poll of “senior bankers and industry officials” and came up with a negligible 10% to 20% chance of a fresh attempt. But as Ward notes, Neil Woodford, the high-profile AstraZeneca defender and investor who runs Woodford Investment Management, thinks it’s closer to 50-50.
Pfizer has kept people guessing on what its next move will be. But the pharma giant managed to reduce the odds for an AstraZeneca deal when it opted recently to make a huge, $2.85 billion deal with Merck KGaA on a very early-stage immuno-oncology pact. Its $850 million upfront quickly vaulted to the top of the list of all-time upfront payments in a development deal, and represents both Pfizer’s need to significantly improve its pipeline as well as its appetite for doing things in a big way.
That deal, though, was focused on a Phase I anti-PD-L1 program and related efforts, leaving Pfizer far back in the pack as AstraZeneca solidifies a position as a player in the field, elbowing its way into a race now dominated by Merck and Bristol-Myers Squibb–with Roche playing a key role as well.
The Obama administration, meanwhile, has done everything it could to derail any future tax inversions like this. It was Pfizer’s bid for AstraZeneca, and the uproar around it, that pushed the administration to advance new rules that made it harder to trade U.S. tax rates for the appealing low-tax haven in the U.K. That put the kibbosh on the big AbbVie/Shire tie-up. And Pfizer would face the same group of harsh critics, ready to pounce on any fresh takeover effort with another attack on Pfizer’s record of R&D destruction in the wake of past takeovers.
The only way this story ends now is with a clear indication from Pfizer CEO Ian Read whether he will or won’t try again–or launches an assault on another big target like Actavis. The pharma giant prefers to keep people guessing for now, as it sorts out how it plans to confront a deteriorating financial position. 
By John Carroll

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