This morning's news says Pfizer CEO Ian Read will pursue AZ anyway despite previous rejections. He maintains that an acquisition of AZ by Pfizer, even if over $100 B, will be accretive. Wow. They must make better drugs than I thought at Pfizer.
Apparently, Pfizer is determined to buy Astrazeneca or else. Read says it is a good deal as it will create a larger company with a significant cancer drug portfolio, a large cardiovascular drug portfolio and a good diabetes business. It will also set them up to take advantage of growth in emerging markets.
However, naysayers point to past efforts in megamergers, ala Wyeth, as largely unsuccessful. Plus a significant number of analysts seem to think AZ is a dog. They believe Pfizers main motivation in acquiring these guys is to provide a haven for its $70 B in overseas cash to protect it from the IRS, and to some degree because AZ is an EU company and can be had. Not very strategic in many ways mind you, but doable.
For its part Read has mentioned that the tax angle is attractive to Pfizer and the new combined company would be headquartered in the UK. Plus other Pfizer manager's seem to be eyeing the combined entity's $11.5 B R&D budget as ripe for the chopping. What better place to start saving your way to prosperity?
But how rosy a picture can this be? AZ is falling on hard times. It's been cutting costs and R&D. It is looking at its two top drugs, Nexium and Crestor, which are about to fall over the patent cliff and face very stiff price competition. Analyst, Fabian Werner, says not very rosy. "I struggle to find a rationale for Pfizer other than repatriating its cash accruals abroad. Doing that, using its cash accruals, they could easily do something else. Astra is the worst target of all of them. Unless Pfizer thinks they are experts on dealing with patent cliffs, I can't see why they would want to buy them."
Posted by Bruce Lehr April 28th 2014