Why Pfizer Will Not Make Another Mega M&A Deal Anytime Soon

Why Pfizer Will Not Make Another Mega M&A Deal Anytime Soon March 15, 2017
By Mark Terry, BioSpace.com Breaking News Staff

Ever since the Pfizer deal with Allergan fell through last year, investors have been wondering if the company will make another mega-deal. It’s made a number of significant deals, including acquiring Hospira for $17 billion in late 2015 and its August 2016 buy of Medivation for $14 billion. Credit Suisse recently had an investor meeting with Pfizer’s management team, as reported by Barron’s, that delved into the company’s plans for merger-and-acquisition activity, as well as other areas.

The meeting included Albert Bourla, group president, Innovative Health, Mace Rothenberg, senior vice president and chief development officer, Oncology, and Chris Boshoff, vice president, Early Development, Translational and Immuno-Oncology. Much of the focus was on the company’s oncology portfolio, although topics included drug pricing and M&A plans.

Credit Suisse is very doubtful that Pfizer has any plans for a mega-deal, although the management team indicates that its ability to close one is a competitive advantage for the company. Credit Suisse writes, “There may be higher sensitivity now for issues such as trying to extract synergies from a larger deal by reducing U.S. jobs, but it does not appear that this alone would keep the company from pursuing a larger deal if they viewed the deal overall as creating shareholder value.”

In the area of immuno-oncology, Pfizer has 10 pipeline products currently in clinical trials, which Credit Suisse believes is an indication it is trying to catch up to its competitors in the space. “While avelumab should receive its initial regulatory approval for Merkel Cell carcinoma by mid-year, the recently formalized changes to the HAVELIN Lung study will prevent the drug’s entry into the lucrative lung-cancer indication for at least two more years,” Credit Suisse wrote. “The aggressive steps they are taking with various combination approaches are commendable, but those will also take some time before they are at a point where we can assign them significant value. We are currently most intrigued by the avelumab+utomilumab+OX-40 triple that will be entering the clinic in a few weeks.”

Pfizer is also confident that Ibrance, which is used to treat ER-positive and HER2-negative breast cancer, will continue its dominance in the cyclin dependent kinases (CDK) 4,6 space, even with new competition from Novartis and Eli Lilly . However, they expressed disappointment at Xtandi’s performance in the fourth quarter. Xtandi was developed by Medivation for the treatment of metastatic, castration-resistant prostate cancer.

According to Credit Suisse, Pfizer’s managers remain “confident in the underlying demand for the product as well as their ability to gain traction with about 4,000 urologists who prescribe Casodex but are not yet prescribing Xtandi, despite Xtandi’s favorable head to head data.”

In terms of drug pricing, the executives feel they behave responsibly and don’t feel they will be doing anything differently. Ian Read, the company’s chief executive officer, recently spoke at the World Economic Forum in Davos, Switzerland and discussed the topic, particularly in the context of then-President-elect Trump’s statements about drug pricing, which haven’t clarified significantly since then. He noted, “We need to pay more for medicine so we can develop more good medicine, so we can drive, through competition, lower costs.”

That’s tended to be interpreted as a little bit of pushback against President Trump’s statements on drug pricing, although only time will tell.

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