(Adds Breakingviews link)
By Ben Hirschler
LONDON, April 21 Pfizer Inc may come
back to bid for British drug company AstraZeneca Plc
after its reported 60 billion pound ($101 billion) takeover
approach was rejected, since a deal could make sense for the
U.S. pharmaceuticals giant as it seeks to build up its cancer
In addition to adding promising - though still risky -
experimental medicines known as immunotherapies that boost the
body's immune system to fight tumors, acquiring AstraZeneca
could also generate significant cost savings, according to
As a result, a deal at around a 25 percent premium to the
current share price funded by cash, cheap debt and some stock
could boost Pfizer earnings immediately, they believe.
Both companies have declined to comment on a report in the
Sunday Times, which cited senior investment bankers and industry
sources saying that Pfizer approached the British
pharmaceuticals group about a deal. The newspaper said no talks
were currently under way after AstraZeneca resisted the
Citi analyst Andrew Baum said he believed the report was
"very likely genuine" and Pfizer could return to the fray, given
the attractiveness of AstraZeneca's pipeline of cancer drugs,
its expertise in autoimmune diseases and the scope for taking
"We anticipate Pfizer to push aggressively ahead with a
second approach," Baum wrote in a research note on Monday,
adding that AstraZeneca might seek to structure any deal as a
merger of equals as a defense strategy.
Betaville, a British financial blog, on Monday said
AstraZeneca had hired Goldman Sachs and Morgan Stanley to act as
"defense" advisors in the event Pfizer makes a new effort to
acquire the London-based drugmaker.
The two investment banks already act as AstraZeneca's
The blog also said that Pfizer may be working with JP Morgan
to work on any potential bid. AstraZeneca and Pfizer declined to
comment on the investment bankers, and officials at Goldman
Sachs and Morgan Stanley could not immediately be reached.
Pfizer shares closed up 2 percent, while AstraZeneca shares
rose 8.8 percent, both on the New York Stock Exchange.
Pfizer has a long track record of making major acquisitions,
with the $68 billion purchase of Wyeth in 2009 its last major
deal, after earlier acquisitions of Pharmacia and Warner
The drugmaker has more recently been divesting certain
operations and mega-mergers have fallen out of fashion in the
pharmaceuticals industry following scepticism about how well
some of them have worked. But Chief Executive Officer Ian Read
has said he would still consider a large deal that made sense.
Read also has an incentive to buy assets overseas rather
than in the United States since Pfizer has tens of billions of
dollars accumulated through foreign subsidiaries, which if
repatriated to the U.S. would be heavily taxed.
A Pfizer move on AstraZeneca might flush out other bidders.
U.S. biotech giant Amgen Inc already has a tie up with
AstraZeneca in autoimmune medicines to treat diseases such as
psoriasis and severe asthma.
Novartis AG and larger GlaxoSmithKline Plc
have also been mentioned in the past as potential suitors,
although GSK has in recent years said publicly it is not
interested in making a large acquisition, while Novartis is in
the middle of strategic review and already has a presence in
Mark Schoenebaum, an analyst at ISI, agreed cancer
immunotherapy was likely the main lure for Pfizer, since the
field is expected to become one of the biggest areas of modern
medicine in the next few years.
However, Mark Clark at Deutsche Bank said Pfizer would be
making something of a "leap of faith" since AstraZeneca's most
exciting cancer drugs are still at an early stage of
Pfizer has a highly promising breast cancer drug in
late-stage development called palbociclib but otherwise its
cancer portfolio is relatively weak.
"Notably, Pfizer appears to be nowhere in the important
field of immuno-oncology, which Bristol-Myers Squibb,
Roche, Merck & Co and AstraZeneca currently
dominate," Schoenebaum said.
Bristol, Roche and Merck are viewed as being ahead of
AstraZeneca in the new cancer field but the British firm
believes it can make up ground by pioneering drug combinations,
including the use of a medicine known as tremelimumab that it
licensed from Pfizer.
AstraZeneca and its rivals will present the latest clinical
data on promising new cancer drugs at the May 30 to June 3
annual meeting of the American Society of Clinical Oncology.
The London market was closed on Monday for Easter but the
talk of Pfizer's interest in AstraZeneca is likely to overshadow
dealings when trade resumes on Tuesday.
AstraZeneca Chief Executive Officer Pascal Soriot, who has
been credited for progress in rebuilding the company's new drug
pipeline since taking over in 2012, fuelling a rally in the
shares, will also come under pressure to address the reported
Pfizer approach when he presents half-year results on Thursday.
Speculation over such a takeover, which would be potentially
the biggest ever foreign takeover of a British company, is
likely to trigger concerns about jobs in Britain's
pharmaceuticals sector, which is viewed as a key industry by the
government but which has been under pressure.
AstraZeneca has already laid off thousands of scientists and
other staff as it shrinks its cost base to cope with a fall in
sales due to patent losses on blockbuster medicines.
With heartburn treatment Nexium losing U.S. patent
protection next month and cholesterol fighter Crestor facing
patent expiry in 2016, the decline in sales is expected to
continue for several years.
In an attempt to reshape the company, Soriot is currently
moving its research and corporate headquarters to Cambridge,
England. Pfizer has also made the university city a research hub
after shuttering a large research site in Sandwich, southern
The Cambridge connection is only one link between Pfizer and
AstraZeneca, highlighting how the companies know each other
AstraZeneca's head of innovative medicines Mene Pangalos
also used to work at Pfizer and the two firms are familiar with
each other's products from working together on projects, such as
a pioneering of a new kind of clinical trial for cancer drugs
announced last week.
(Editing by Jane Merriman, David Holmes and Lisa Shumaker)