Will Pfizer Sweeten the Offer?

Ranjith Gopinathan, Life Sciences Programme Manager at Frost & Sullivan, comments on Pfizer’s possible takeover of Astra Zeneca

 “We are witnessing a new surge in M&A activities in Big Pharma, as large companies are now seeking to strengthen their core business and divest the weak ones. 

For instance, Pfizer is already in talks with AstraZeneca for an outright acquisition. This strategy ties in with Pfizer’s historical M&As, which include its $68 billion acquisition of Wyeth in 2009 due to the company’s strong biologics pipeline particularly in Central Nervous System disorders.

The key driver for the latest offer is AstraZeneca’s strong pipeline in immunotherapies. Moreover, it would enhance Pfizer’s offering in oncology, cardiovascular and diabetes. It would also boost its footprint in emerging markets. Although AstraZeneca has rejected Pfizer’s offer twice, the reason for this seems to be a price negotiation tactic.

Furthermore, there is a strong possibility that Pfizer would move its base to the UK for tax saving purposes. In fact, avoiding a higher tax in the US could be the major reason behind Pfizer’s latest move. Although immuno-oncology is a highly lucrative segment for pharma companies, it would face stiff competition from companies such as BMS, Merck and Roche with late-stage drugs in the pipeline. 

Many Big Pharma firms are sitting on huge cash piles and are hunting for acquisition targets with promising drug pipeline. One possible outcome of this rapid consolidation is the augmented bargaining power of big pharma against payers and government.  In theory, mergers and asset swaps are expected to improve efficiencies and productivity of the drug development process. However, integration, post M&A has never been an easy task. 

Now, the billion dollar question is, would Pfizer sweeten its offer to clinch the deal?”