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Pharma M&A on Steroids: Pfizer Breakdown

In Partnering & Investment, Pricing & Market Access by Yolanda King1 Comment

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Pharma M&A activity has seen such an uptake in recent weeks and the industry is alive with developments and momentum. Andrew Badrot, a speaker at the Pharma M&A Briefing on 10th June has kindly analysed the role that Pfizer has played in the market in this guest blog.

The industry has been on a roller coaster over the last few weeks, Pfizer is setting itself up for a battle to take over AstraZeneca, Novartis has structured a series of transactions with GSK and Eli Lilly, Valeant is chasing Allergan and you already have $175 bn of potential deals just there.

The rational behind each deal is quite different:

Pfizer is chasing the next big acquisition. Military tacticians would refer to it as “carpet-bombing” as opposed to a “precise strike”. Pfizer strengthens its drug development pipeline, cut costs out and benefit from a tax inversion, the cherry on the cake. Pfizer has also demonstrated it could manage such large integrations with Warner-Lambert in 1999 acquired for $112 bn, Pharmacia in 2002 acquired for $60 bn and Wyeth in 2009 acquired for $68 bn. They were able to demonstratively cut costs out. The Financial Times reported $21 bn in sales and admin costs for Pfizer/Wyeth in 2009 vs. $14 bn today, R&D was at $11 bn vs. $6.5 bn today. A caveat to those numbers is that Pfizer shed some business along the way. It spun off its Animal Health business into Zoetis and sold its Nutrition business to Nestlé. It also lost $10 bn in sales due to loss of patent protection for Lipitor. The Financial Times estimates that Pfizer could get as much as $38 bn in additional present value in synergies from the AZ deal, about half through cost cutting and the other half through tax inversion.

Andrew has also written a downloadable piece on Pharma M&A, which you can Download Here, giving a detailed insight into current activity and the market as it stands. If you are interested in the recent activity and would like to hear Andrew discuss these developments further, join us at the inaugural Pharma M&A Briefing on 10th June, where you will hear from industry experts on how to be successful in Pharma M&A. Click here to download the brochure.

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