3 Reasons Why Pfizer Could (and Should) Snap Up Celgene
When it comes to the big fish of pharma, there is none bigger than Pfizer. With size comes an appetite, and Pfizer has been hungrily scouring the seas for some time with recent advances on both AstraZeneca and Allergan. AstraZeneca is certainly no minnow with the offer at $118 billion three years ago, the company were targeting the very top of the food chain. Who might be next then, if Pfizer is still big game hunting to offset patent expiries and to boost growth despite a cash stockpile (including cash, cash equivalents, and short-term investments) stood at a little under $17 billion as of Oct. 1 and already nearly $44 billion in debt.
An article by the Motley Fool has taken a look at the situation and speculated 3 key reasons why snapping up Celgene, a company with a market cap of $80 billion and expectations to grow sales by 14.5% annually through 2020 might be the answer to Pfizer’s woes.
Firstly, Pfizer’s earnings growth would be boosted significantly. The patent cliff took a heavy toll on the drugmaker – and is still doing so to some degree. Even with Pfizer’s acquisitions last year of Medivation and Anacor, analysts project the company will grow earnings by only 6% over the next five years.
Secondly, an acquisition of Celgene would bring a boatload of current and potential blockbuster cancer drugs into Pfizer’s fold. There is little overlap between the two companies’ portfolios and pipelines in hematology. Pfizer already has rising stars with breast cancer drug Ibrance and prostate cancer drug Xtandi. However, sales for chemotherapy Sutent are slipping and are likely to drop even more with newer rivals on the scene. While Pfizer and partner Merck KGaA have several late-stage studies in progress for Bavencio in treating multiple types of cancer, the immunotherapy recently suffered a setback in a late-stage study targeting gastric cancer.
Lastly, they reckon the timing of a Pfizer-Celgene combination is ideal. Celgene is cheaper than it’s been in a while as a result of what I viewed as investors panicking in the wake of the pipeline setback for GED-0301 and some headwinds for Otezla and the prospects for corporate tax reform in the U.S. appear to be pretty good, although it’s still possible that a deal falls apart. Pfizer keeps a significant amount of its cash parked overseas, so a lower tax rate on repatriating that money could be ideal for spurring a deal.
It was only last month however that Keith Speights Writing for The Motley Fool chalked up a list of potential acquisition targets for Celegene itself so more a big what if, than news of an expensive “royal wedding”.