Pfizer-AstraZeneca: Is This Pharmaceutical Deal Drowning in the Atlantic?

Pfizer

By Jordan Faigen

Memorial Day was full of parades to honor fallen servicemen, barbeques and shopping.  Or, in Pfizer’s (PFE) case, a lack thereof.

Pfizer in the News

On Monday, Pfizer Inc. (NYSE:PFE) , one of the world’s largest pharmaceutical companies, withdrew its bid to purchase London-based pharmaceutical company, AstraZeneca (AZN), after the company rejected four previous offers. Pfizer’s last offer of $117 billion was rejected by AstraZeneca plc (ADR) (NYSE:AZN) even though Pfizer claimed the proposed amount represented “full value”. Now that the latest proposal deadline has passed, a required three month cooling-off period has come into effect before any additional conversation can be had about a potential deal. It might be quiet, but it appears that nothing is off the table, yet.

What Does This Mean for Pfizer’s Stock?

On May 23, Seeking Alpha contributor, Stock Gamer, noted Pfizer is within the buying zone below $30.  Due to the fact that the stock has dropped by 7% over the past three years, and underperforming a gain of 2% for the S&P-500 over the same period, Stock Gamer says, “the recent price weakness has presented an invaluable buying opportunity, as I see limited downside risk from here.” Stock Gamer noted, “The price pullback was largely due to Pfizer’s disappointing Q1 performance whereby the company’s top line came in below consensus estimates due to underperformance from many products.” He believes that now is the time to BUY because, “Pfizer has been working diligently to create long-term shareholder value by focusing on strategic actions including a major acquisition (i.e. the AstraZeneca plc (ADR) (NYSE:AZN) deal) and divestitures (i.e. potential sale of business units in few years).” Stock Gamer also points out that, “Even if the AstraZeneca deal does not go through, I believe management will pursue smaller M&A opportunities and return a large amount of capital to shareholders.” Stock Gamer has a +5.1% average return on the stock, helping him earn a +8.6% average return per recommendation, with a 70% success rate of recommendations.

Even though  Pfizer Inc. (NYSE:PFE) is backing away from the AstraZeneca discussion right now, Credit Suisse analyst Vamil Divan still recommended BUY Pfizer on May 27. Divan is confident in current management, saying, “The current Pfizer management team has consistently been proactive and strategic in generating shareholder value, and we do not think an inability to complete an AstraZeneca acquisition would change that.” Now, Divan sees Pfizer moving on to address other acquisitions, “”As opposed to a mega-merger, we would expect Pfizer to now focus on bolt-on acquisitions in areas where AstraZeneca plc (ADR) (NYSE:AZN) would have given them some added strength (e.g., oncology/immuno-oncology, inflammation, emerging markets) to help boost [its] business segments.” Divan has a +2.5% average return on the stock, helping him earn a +20.2% average return per recommendation, with a 62% success rate of recommendations.

Conclusion

While this across-the-pond merger has been put on the back burner for now, analysts are still confident in  Pfizer Inc. (NYSE:PFE) due to their strong management and strategic business strategies.

Jordan Faigen covers financial markets and the latest stock market news. She can be reached at Jordan@tipranks.com

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