Pfizer's Eyeing AstraZeneca To Bolster Pipeline, Analysts Say

Pfizer’s public pursuit of AstraZeneca is driven by Pfizer’s desire to strengthen its pipeline of pharmaceutical drug products, industry analysts say. Pfizer has made a $100 billion bid for AstraZeneca, a bid which analysts argue is a page taken from last decade’s book when pharma companies entered into “mega-mergers” that would ultimately provide valuable cost savings for the U.S. based company. In Pfizer’s case, the company would not only see a reduction in its tax rate by moving its base into Britain, but the move would also ease growing concerns over the low returns on Pfizer’s research and development of new drugs.

Some believe  Pfizer is maneuvering from a “position of weakness” as Michael Liss, an American Century Investments portfolio manager stated. “If they had enough in their own pipeline, they wouldn't need to buy a big company; they'd be doing smaller collaborations,” Liss said.

The move to acquire AstraZeneca came as a surprise for some, considering Pfizer’s CEO Ian Read had turned away from making major deals because the company’s previous large deals didn’t bring the financial rewards or pharmaceutical development that Pfizer had hoped for, for example the $90 billion Warner Lambert deal in 2,000Other major deals the company has made in the past decade include a $60 billion purchase of Pharmacia Corp in 2003 and a $68 billion purchase of Wyeth in 2009.

AstraZeneca has a pipeline of immunotherapeutic drugs, which work by stimulating the patient’s immune system. Researchers believe that these kinds of drugs are the future of cancer treatments and have the potential to be quite lucrative. . Pfizer has faced recent failures with kidney cancer treatments Inlyta and Xalkori. The company’s experimental breast cancer drug, palbociclib, is expected to face strong competition in the open market.

Industry experts claim that Pfizer’s relatively weak pipeline and steadily declining growth means that the company needs to make a move to either cut costs or increase growth, and an AstraZeneca deal could do both for Pfizer.