The speculation over a Pfizer-GSK deal centers around diversifying Pfizer’s vaccine and consumer portfolios, taking advantage of a tax inversion by shifting its domicile to a more tax-friend country, and dramatically increasing its revenue base for the vaccine and consumer areas.
Not all analysts think a Pfizer-GSK deal is likely. Andrew Baum, an analyst with Bloomberg, is quoted by David Weinberg in The Motley Fool, as saying, “that [British] government resistance to preserve GSK as an independent listed company is materially higher than it was with [London-based] AstraZeneca.”
Such a merger would cut costs for Pfizer because both companies have some overlapping development programs. GSK also has 40 drugs in development with about 20 expected to be filed with regulators in the next five years, and most are new molecules as opposed to newer versions of older drugs.
Despite some ups-and-downs, GSK reported strong second-quarter earnings this year. The asset deal with Novartis AG (NVS) offset a revenue drop from sales of Advair. Sales for the quarter rose 6 percent to $9.2 billion, but core earnings dropped to 27.1 cents per share, a decrease of 9 percent from the second quarter of 2014.
However, a three-part transaction with Novartis was noteworthy and a possible factor in any Pfizer acquisition. In that deal, GSK acquired Novartis’s vaccines business, except its influenza vaccines, created a consumer healthcare joint venture, and sold off its oncology portfolio and related research and development activities to Novartis.
The vaccine portfolio GSK acquired would be a strong addition to Pfizer’s Prevnar line of products.
Other companies that might be interested in GSK include Novartis (NVS). In order for that to happen it might be necessary to involve Swiss-based Roche Holding AG (RHHBY) to take over some of GSK’s assets. Johnson & Johnson (JNJ) is also a potential suitor. JNJ’s rationale would probably be to expand its over-the-counter (OTC) drug and consumer healthcare businesses. JNJ is not in the vaccine business. If it did acquire GSK, it would either sell off that division or use it as a place to start.
Of course, there’s speculation —or at least some urging—for JNJ to break into three separate companies. The notion there is JNJ has three separate divisions, pharmaceuticals, consumer healthcare products and medical devices, and by splitting up, would be better able to focus on each area and each company’s specific customer base.
However, Pfizer noted at an investor meeting Bank of America (BAC) analyst Colin Bristow reported on this week, that a “transformative” merger and acquisition was “highly unlikely” and cited the uncertainty regarding corporate tax reform legislation. Until that was cleared up, possibly by the end of the year, Pfizer was more likely to focus on smaller acquisitions.
August 13, 2015
By Mark Terry, BioSpace.com Breaking News Staff
Source: BioSpace Featured News