Pfizer’s M&A record hardly inspires confidence. The $205 billion drug giant’s last two huge acquisition attempts failed. From here, it could try another merger to cut its tax rate, it could enter one or more potentially heated auctions, or it could split up. If it wants to succeed at dealmaking, the company led by Ian Read needs clearer goals.
Pfizer is still smarting from its rejected attempt to buy AstraZeneca for nearly $120 billion in 2014 and the more recent agreed $160 billion acquisition of Allergan which was scuppered last month by the U.S. Treasury’s clampdown on tax-driven deals.
The new rules against so-called inversions, in which cross-border mergers help U.S. companies change their tax domicile, sent Pfizer back to the drawing board. So far, Read and his colleagues have responded only with a variety of scribbles.
Read said this week he would still entertain deals of any size, and he has ruled out another big tax-reducing acquisition only for the immediate future. One relatively small but potentially pricey option could be Medivation. The $10 billion cancer-focused biotech is fighting off an unsolicited offer from Sanofi, and its takeover defenses are weak. Pfizer has expressed interest, too, according to Reuters sources.
The company has, however, also been considering breaking up since 2013. That option has excited shareholders skeptical of Pfizer’s dealmaking prowess. Read has created value for shareholders disposing of assets such as animal health unit Zoetis. The spinoff’s shares have comfortably outperformed those of its former parent.
Read says a split is still on the table and that Pfizer will decide whether to do it by the end of this year, with a view to making it happen by the end of 2017. But over the years, the company has seemed more entranced with possible acquisitions. Actually setting a strategy might impress investors more than keeping all options open.