British pharmaceutical company AstraZeneca has rejected a merger offer from Pfizer. The deal would have been worth almost $100 billion. AstraZeneca decided that it would rather continue to operate on its own, saying that the takeover premium was too small and that the deal was ill-timed and opportunistic. According to industry experts, if the deal had gone through, it would have been the largest pharmaceutical deal of all time — even larger than Pfizer’s $90 billion acquisition of Warner-Lambert in 2000.
There are several key reasons industry experts believe Pfizer set its sights on AstraZeneca. Location was one factor. If the company had instead targeted an American pharmaceutical company, they would likely be responsible for a large tax bill. Pfizer had about $69 billion in earnings from international subsidiaries as of the end of 2013.
Pfizer could also be drawn to AstraZeneca because of the company’s pipeline of cancer drugs. The British company is starting clinical trials this year on a drug that will use the body’s immune system to target and destroy cancer tumors. Investors and industry experts believe that research will likely turn toward using the body’s immune system as a weapon against cancer cells rather than developing new traditional cancer drugs. This research has investors and researchers excited, as both are predicting new treatment practices and billions in sales for new drugs.
AstraZeneca’s own revenues have dropped in recent years, and in 2013 revenues were down 8 percent. Analysts believe that this number is due to the company’s loss of patent protection for certain drugs, and that new cancer treatments in the pipeline targeting the body’s immune system could help revenues bounce back.
Pfizer is well known for its pricey acquisitions, having purchased Pharmacia in 2002 for $60 billion and Wyeth in 2009 for $68 billion.