Can Pfizer finally orchestrate a winning megamerger after so many disappointments?

Pfizer CEO Ian Read

Pfizer's ($PFE) decision to buy Allergan ($AGN) wasn't much of a surprise; the nominally Dublin-based Allergan was among the few buyout targets that could deliver CEO Ian Read's desired tax inversion.

Nor is it surprising that Pfizer chose to rack up another megamerger, given its history of huge deals. In fact, the record Pfizer broke with its $160 billion deal for Allergan was its very own, set with the $111 billion takeover of Warner-Lambert back in 2000.

That of-course-they-did reaction to the Pfizer-Allergan merger agreement was followed by a series of analyst notes totting up the financial effects of the deal--the jobs Pfizer might cut, the costs it might save, the earnings that might accrete in the coming years, the buybacks it could fund with its overseas cash.

More than one analyst pointed out that the deal's rationale is pretty well limited to its tax benefits. And Allergan shareholders, for their part, don't seem overly excited; the stock is still trading significantly below the deal price. But compared with the ink spilled to explain or assess the biggest deal pharma has ever seen, critical questions have been few.

Forbes' Bernard Munos put his pen to that task, taking a look at the financial effects of Pfizer's dealmaking, big and small. The bottom line? Not much, literally. In one chart, Munos points out, Pfizer's revenue spikes after each major deal, but then flattens or declines until the next. In another, its rate of R&D productivity doesn't change--with one drug approval per year, on average, over the last 35 years--despite the addition of new R&D operations and accompanying increases in spending. Overall, Pfizer's sales are now back to where they were before it bought Wyeth in 2009.

"A company that needs repeated mega-acquisitions to keep afloat is inherently unsustainable," Munos notes.

What should Pfizer do instead? After all, its challenges reflect those faced by the entire pharma industry. But Munos figures that Pfizer should zero in on R&D and innovation, rather than distracting itself with deals (and potential split-ups, possibly). Essentially, he says, Pfizer needs to imitate Johnson & Johnson ($JNJ)--whose "zeal" for innovation has delivered 15 approvals off $51 billion in spending, compared with 10 drugs off $80 billion, Pfizer's record for the same period.

Brent Saunders

Easier said than done, of course, and Pfizer and Allergan maintain that this deal will be different--integration will be easier, key talent will stick around, and so on. And after Shibani Malhotra of Nomura issued a note on Tuesday urging Allergan's shareholders to think more positively about the payoffs of the Pfizer merger, another couple of analysts rolled out their own new notes to the same effect. Leerink Partners, for one, thinks that Pfizer can actually cut more costs out of the combined company than it's now projecting, and after a meeting with Allergan management, believes that its CEO (and future Pfizer COO) Brent Saunders thinks so, too.

But is the deal good for Pfizer's shareholders? Leerink also issued a note saying that its sum-of-the-parts valuation of the postmerger Pfizer--taking into account a future breakup between the innovative and established businesses--essentially would take Pfizer's share price no higher than it would have been without the deal, "suggesting that the near-term value captured by the deal is going to Allergan shareholders."

The billions that Pfizer will likely spend on buybacks mean long-term payoffs for shareholders, however. But it's that sort of thinking that put Pfizer where it is now, Munos suggests, and that sort of thinking is likely to continue, at least with Read and Saunders in charge, he says, calling on shareholders to take a harder look at the deal.

Meanwhile, some funds invested in Allergan are lining up for their payoffs, some ranging almost to $1 billion. And despite a lot of bluster about Pfizer's abandoning the United States for greener lands, politicians aren't likely to do anything to get in the way of the merger.

- read the column from Forbes

Special Reports: The top 15 pharma companies by 2014 revenue - Pfizer | Pharma's top 10 M&A deals of 2014 - Actavis/Allergan - Actavis/Forest Laboratories | The 25 most influential people in biopharma in 2015 - Brent Saunders - Actavis

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