Expecting Big Pharma buyers to come running after weakened AstraZeneca? Not so fast

AstraZeneca HQ
European drugmakers may wait to bid on AZ until they know what Pfizer's next M&A move will be, sources tell Reuters.

Industry watchers speculated before the release of AstraZeneca’s top-line lung cancer combo data that a share-plunging flopped trial could prime the British drugmaker for a takeover. But with that flopped trial now in the books, a buyout may still not be so easy.

Deal-hungry Pfizer, which has been named time and again as a potential buyer--even after its failed $118 billion attempt in 2014--isn’t likely to make a second try at the drugmaker, Reuters’ sources say. For one, with stricter rules on tax inversions in place, a deal would lack the tax-saving benefits Pfizer was seeking at the time.

Another potential reason? Still-missing tax reform in the U.S. While the company at one point said it wouldn’t wait around to see whether new rules made cash trapped overseas available for dealmaking, it later flip-flopped on that sentiment, citing uncertainty surrounding tax reform as a reason to pull back the M&A reins.

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Pfizer has also said more than once lately that it’s committed to its immuno-oncology partnership with Merck KGaA, a marriage that’s produced PD-L1 Bavencio. And as Bernstein analyst Tim Anderson has noted, Pfizer in the past has “proven itself to be a very transparent company.”

“In our view, it would be uncharacteristic of them to strongly support avelumab one minute, and then ditch it the next,” he wrote to clients in June.

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Of course, AZ has more going for it than its immuno-oncology lineup, which took a big blow last weeksinking shares 15%as an Imfinzi-tremelimumab combo missed the mark in first-line lung cancer. For one, it boasts PARP leader Lynparza, though it recently bade farewell to half the drug’s revenues through an $8.5 billion agreement with Merck.

And there are other potential buyers out there aside from Pfizer, too. Novartis has seen its name come up in AstraZeneca buyout rumors, and GlaxoSmithKline last week announced its intentions to beef up in oncology, an area it previously exited. Then there’s Sanofi, which was frustrated at the dealmaking table last year when Pfizer thwarted its hostile quest for Medivation.

Unlike Pfizer, thoughwhich followed up its AZ bid with a later-canceled deal for Allerganthat trio of drugmakers may be wary of jumping into a megamerger situation, Reuters’ sources say. And that may be especially true while they’re waiting for Pfizer to make its next move.

"Pfizer has taken a break on M&A for now and no one expects them to make another move for AstraZeneca. But M&A is like a game of chess and nobody will go after AstraZeneca until Pfizer picks its next target," one unnamed banker told the news service.

Other, older drugs in AstraZeneca’s lineupCrestor, for onecould dampen the enthusiasm for its growth products, too. Spinning off a portfolio of elderly products could be an option, some bankers told Reuters, though it likely wouldn’t happen anytime soon.

And then there’s the political pressure AstraZeneca has faced at home since Pfizer came calling. In a 2016 speech, U.K. Prime Minister Theresa May name-dropped the company and highlighted the need to "defend a sector that is as important as pharmaceuticals is to Britain,” Reuters notes.