Pfizer may improve on offer for UK drug rival

Pfizer may come back to bid for British drug company AstraZeneca after its reported £60bn (€73bn) takeover approach was rejected, since a deal could make sense for the US pharmaceuticals giant as it seeks to build up its cancer franchise.

In addition to adding promising experimental medicines known as immunotherapies that boost the body’s immune system to fight tumours, acquiring AstraZeneca could also generate significant cost savings, according to industry analysts.

As a result, a deal at around a 25% premium to the current share price funded by cash, cheap debt and some stock, could boost Pfizer’s earnings immediately, they believe.

Both companies have declined to comment on a report in the Sunday Times, which cited senior investment bankers and industry sources saying that Pfizer approached the British pharmaceuticals group about a deal.

The newspaper said no talks were currently under way after AstraZeneca resisted the approach.

Citi analyst Andrew Baum said he believed the report was “very likely genuine” and Pfizer could return to the fray, given the attractiveness of AstraZeneca’s pipeline of cancer drugs, its expertise in autoimmune diseases and the scope for taking out costs.

“We anticipate Pfizer to push aggressively ahead with a second approach,” Mr Baum wrote in a research note yesterday, adding that AstraZeneca might seek to structure any deal as a merger of equals as a defence strategy.

Pfizer has a long track record of making major acquisitions, with the $68bn purchase of Wyeth in 2009 its last major deal, after earlier acquisitions of Pharmacia and Warner Lambert.

The drugmaker has, more recently, been divesting certain operations and mega-mergers have fallen out of fashion in the pharmaceuticals industry following scepticism about how well some of them have worked.

But Pfizer CEO Ian Read has said he would still consider a large deal that made sense.

Mr Read also has an incentive to buy assets overseas, rather than in the US, since Pfizer has tens of billions of dollars accumulated through foreign subsidiaries, which — if repatriated to the US — would be heavily taxed.

A Pfizer move on AstraZeneca might also flush out other bidders. Biotech giant Amgen has a tie-up with AstraZeneca in auto-immune medicines to treat diseases like psoriasis and severe asthma.

Novartis and GlaxoSmithKline have also been mentioned in the past as potential suitors, although GSK has said it is not interested in making a large acquisition, while Novartis is in the middle of a strategic review.