Pfizer AstraZeneca acquisition bid?

A Pfizer AstraZeneca acquisition bid may bear fruit after the British giant (AstraZeneca) apparently turned down a $101 billion (£60 billion) takeover offer from the American super-giant (Pfizer). Shares in AstraZeneca jumped in pre-market trading in New York. London’s stock market was closed on Monday for Easter.

Update: The two companies confirmed on Monday, April 28th, that Pfizer has approached AstraZeneca twice. Once in January and again during last weekend.

Pfizer, the world’s largest drug company, is seeking to build up its range of cancer medications and pipeline products, something AstraZeneca possesses.

According to the UK Sunday Times, investment bankers reported that Pfizer had approached AstraZeneca about a takeover deal during the weekend. Apparently, the British drugmaker resisted the deal.

AstraZeneca, with headquarters in London, employs 50,000 people worldwide.

Pfizer AstraZeneca acquisition bid probably genuine

Analysts today are reporting throughout the UK and US media that the Sunday Times article is probably genuine and Pfizer will likely continue hitting on AstraZeneca (AZ), given its attractive pipeline of experimental oncology medications. They add that not only would acquiring AZ provide it with a tempting range of new products, it would also generate significant cost savings.

Reuters quoted Andrew Baum, a city analyst, who wrote “We anticipate Pfizer to push aggressively ahead with a second approach.” Baum added that AstraZeneca might as a defense strategy attempt to structure a merger-of-equals deal.

Mega mergers less common today

Historically, Pfizer has been a purchaser of large companies. In 2009, it acquired Wyeth for $68 billion, and previously bought out Warner Lambert in 2000, and Pharmacia in 2003.

Giant mergers have become less common in the pharmaceutical industry over the last few years because many of them did not turn out well. However, Ian Read, Pfizer’s CEO, has expressed interest in making a large deal.

Time Anderson, an analyst at Sanford C. Bernstein, said to Fierce Biotech “Many investors and industry observers alike feel that Pfizer is in its currently difficult position precisely because of prior mega-mergers. Nearly every big drug company that has undergone large mergers now laments how disruptive transactions like these are to important business functions such as R&D. Pfizer has said the same.”

Industry experts say acquisitions kill research and development (R&D). One year before Pfizer bought Wyeth, Pfizer spent nearly $8 billion on R&D and Wyeth $5 billion. Five years later Pfizer spent just $6.55 billion.

AstraZeneca, the result of a merger between Zeneca and Astra in 1999, is no stranger to this behavior. In 2007 it made a significant acquisition of $15.2 billion when it bought Medimmune.

Buying a foreign company makes economic sense for Pfizer, a company over $70 billion abroad. If that money were brought back to the United States it would come with a hefty tax bill.

Moving in on AstraZeneca would also flush out the likes of GlaxoSmithKline (GSK), Novartis and possibly Amgen. GSK has said it has no interested in becoming involved in any mega acquisition. However, who knows what Britain’s largest drugmaker might do to prevent others from jumping in.

A large percentage of AstraZeneca shareholders protested at the company’s executive pay packages at the Annual General Meeting.

On Monday, GSK and Novartis announced a multi-billion dollar deal in which Novartis will buy GSK’s cancer unit, GSK buys Novartis’ vaccines (exc. flu) unit, and the two companies’ consumer healthcare businesses merge.