AstraZeneca Merger with Pfizer Could ‘Fit’ Claims GlobalData

Research firm GlobalData says its whitepaper entitled ‘Pfizer’s AstraZeneca Takeover: Reinforcing Prescription Pharmaceutical Leadership’, shows the proposed £63bn (US$100bn) merger between the two could be a complementary ‘fit’. The latter’s strong research & development (R&D) and drug product pipeline, especially in oncology, align well with Pfizer’s deep pockets and sales strength claims the consultancy.

According to GlobalData’s analysis if Pfizer’s contested takeover of AstraZeneca is successful then the world’s largest pharmaceutical company would pull well clear of its nearest rivals in Switzerland’s Novartis and F. Hoffman-La-Roche.

Joshua Owide, GlobalData’s director of healthcare industry dynamics and the whitepaper author, said that if the deal went ahead it would be unlike any other in Pfizer’s corporate evolution to date. The majority of value involved in the merger attempt would come from Pfizer’s ability to nurture on-going R&D activities at AstraZeneca [thanks to its large cash reserves]. Aggregated R&D expenditure could be over US$11bn and the consolidated company could create a pipeline with overall projected annual sales of $10.8bn by 2019.

“AstraZeneca’s expiring drugs would meld into Pfizer’s Established Products division, and the former’s promising pipeline would bolster the other two Pfizer business units, which focus on new medications and consumer health, making them prime candidates for divestment,” added Owide.

Pfizer would gain a much larger oncology pipeline, he continued, thanks to the fold-in of AstraZeneca’s late-stage, anti-cancer agents. These include moxetumomab, olaparib and tremelimumab, which is a candidate developed by Pfizer and licensed to MedImmune.

Indeed, with Roche having launched its latest generation of oncology antibody therapies in 2013, AstraZeneca now boasts the most promising oncology pipeline in the pharmaceutical industry, continues GlobalData’s analysis, with projected 2019 revenues of $4.7bn, ahead of rivals Merck & Co and Bristol-Myers Squibb. Furthermore, AstraZeneca is currently investigating compounds in 60 oncology indications across Phase I and Phase II trials, representing a significant strategic opportunity for Pfizer.

Owide states that the branded oncology market is forecast to grow by annual sales of $76.7bn between 2013 and 2019, making it the largest disease market by a sizable margin and also the fastest-growing one, with a compound annual growth rate (CAGR) of 10.5%.

He continues: “The potential gain that Pfizer could extract from AstraZeneca’s pipeline, in relation to other components of the combined business, shows that any value from its deal with AstraZeneca would be heavily tied to its ability to nurture the UK giant’s emerging pipeline. Of course, such a deal would carry a high level of risk, and Pfizer will look to argue this point as it attempts to convince AstraZeneca’s management and shareholders to relinquish their control for a fair price.”

Contested Bid Likely To Run and Run

Whether or not the deal goes ahead is of course up for debate with both firms appearing at a UK Parliamentary committee this week making their respective cases over the contested bid, amid fears of a dissolution of the UK’s science base, job losses and concerns about asset stripping. Concerns about if Pfizer is merely targeting the UK for its planned 20% corporate tax rate next year have also raised fears in its ‘home’ US market that it could seek to reduce the amount of tax it pays in America.

Further doubt about the likelihood of a successful conclusion to Pfizer’s takeover attempt were raised earlier this week when Fitch revealed that its £63bn bid had led to a 21% tightening of AstraZeneca’s credit default swap (CDS) position [LINK to news story from 12 May, starting ‘CDS Sentiment‘] on global markets as it promotes higher revenue targets as part of its defence. This could strengthen the firm in its battle to fight off the unwanted takeover, especially as Pfizer’s CDS position has widened 28%, amid fears that it may take on too much debt to facilitate the deal.


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