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Pfizer hints at possible Bristol-Myers deal

May 5, 2017

Pfizer is no stranger to big acquisitions—although the failures of attempted mergers with AstraZeneca (AZN) and Allergan (AGN) may have left them a bit gun-shy. Both of those deals fell apart over pressure and regulatory changes by the U.S. government. The Trump administration has suggested major corporate tax changes that would make big mergers possible—even with companies headquartered in lower-taxed countries allowing inversions—so maybe Pfizer will take another shot at it.

At the company’s first-quarter financial conference call, it hinted that it was keeping an eye on Bristol-Myers Squibb (BMY).

Total revenues for the quarter were down 2 percent from $13.005 billion in the first quarter in 2016 to $12.779 billion this quarter. Reported net income was up 3 percent from $3.038 billion in the first quarter of 2016 to $3.121 billion this quarter. The best growth was in its biosimilars, which showed 62 percent growth. Its first biosimilar, Inflectra, is similar to Johnson & Johnson (JNJ)’s Remicade. It launched with partner Celltrion (068270.KQ) in late-2016.

Despite missing out on Allergan, the company has made several acquisition, including Hospira in late-2015, and Medivation (MDVN) in late 2016 for $14 billion. Still, investors and analysts want Pfizer to buy something to bolster those sagging revenues.

Lisa LaMotta, writing for BioPharmaDIVE, says, “Rumors have swirled that Pfizer is interested in nabbing fellow big pharma peer Bristol-Myers Squibb, but the failure of Bristol’s checkpoint inhibitor Opdivo (nivolumab) in lung cancer last summer has been a major overhang on the stock, calling into question whether future growth is durable.”

That isn’t to say that Opdivo is any kind of failure. Sales of Opdivo alone grew by $835 million in the fourth quarter of 2016 and by 60 percent in the first quarter of 2017. Bristol-Myers also indicated that Opdivo continues to be approved for more indications in the U.S. and Europe.

And first quarter Bristol-Myers revenue grew 12 percent to $4.9 billion. Nonetheless, although company stock is up from where it was at the beginning of this year, its current price of $55.95 is a far cry from its price of $75.32 on Aug. 4, 2016.

Without citing Bristol-Myers specifically, Pfizer’s chief executive officer, Ian Read, did say at the quarterly conference call, “Certain large companies have binary risks that could alter their valuations. I believe the industry will continue to consolidate over time. There is too much fragmentation in the industry. Pfizer has been, and will continue to be, an active industry consolidator.”

But he also noted a great deal of uncertainty in the marketplace, particularly in terms of whether the U.S. government will implement corporate tax reform that would allow Pfizer to repatriate its overseas cash, which totals around $80 billion.

“We think we have the capability if there is value in the deal, to do a mid-size deal,” Read said during the conference call. “We also think we have the capability, should the opportunity arise, to do a large deal. But we want to see these uncertainties around tax and politics resolve themselves.”

And he wasn’t referring just to the U.S., but for the UK, Brexit and the European Union.

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