1 May 2014
This morning, Pfizer PFE -1.51% said that it is trying to convince AstraZeneca to sell itself for $100 billion; so far, Astra is wary. But Pfizer went so far as to explain to investors what it would do with Astra’s major products, one by one.
Pfizer has three divisions, a setup that most of Wall Street views as a setup for a breakup. Astra’s products would be put into these three divisions, and though a breakup might be delayed slightly by the deal, it seems to still be Pfizer’s intention to consider one no sooner than three years for now. Two divisions are focused mostly on launching new drugs: one on oncology, vaccines, and consumer products; and one focused on basically everything else. A third division is focused on established products: generics, and those products that are nearing patent expirations.
Here is what Pfizer would do with Astra’s experimental products. Note how many drugs are going to be in development for oncology. Bulking up in oncology is part of the strategy for this deal in the same way as it was for Novartis buying GlaxoSmithKline’s oncology assets last week. Products in italics are not yet approved.
A similar picture emerges when it comes to the approved products or those in late-stage trials (again, in italics.) Note how much bulk this creates not just in oncology but also in cardiovascular disease. Astra’s recent efforts in cardiovascular disease have mostly gone badly, but it’s doing better in diabetes, and Pfizer might be able to use this scale to cut better deals with governments and insurance companies.
Then a lot of existing Astra drugs would get lumped into the “established products” unit, including Crestor, currently AstraZeneca’s best seller, and Seroquel. These could conceivably be spun off after they’ve lost patent protection several years from now.
There are also other forces driving the deal, including cost cuts and an increased tax rate.
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