Curiosity among investors on the rumors of potential Pfizer Inc.(NYSE:PFE) and GlaxoSmithKline Plc (ADR)(NYSE:GSK) merger heightened yesterday after Gregg Gilbert, analyst at Deutsche Bank, sent a note to clients “introducing PfizerKline.” The analyst argued that the acquisition will be accretive to Pfizer, to improve its tax and “unlock access to its balance sheet.”
The analyst made a deeper analysis on the potential merger, which demonstrates that thePfizer-Glaxo merger generate a combined savings “of $3.7 billion or 10% of operating expenses.” The analysts calculates that if Pfizer bids for 1,924 pence of each Glaxo share, which is a premium of over 34% from its current levels, then Pfizer’s synergies through the acquisition can increase its earnings per share by 10% for the first year and by 16% in the fourth year after acquisition.
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However, we need to keep in mind the company’s failed attempt to acquire AstraZeneca in 2014, which had more than 50,000 employees. Meanwhile, GSK is an even bigger company having a market cap of $109.8 billion and over 115,000 employees across the world. We need to see whether Pfizer Inc. will proceed to successfully acquire GSK.
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Pfizer Inc. has been under pressure from the end of 2011 as it lost patent protection to its major drug Liptor. Since then the company has been aggressively exploring opportunities to increase its top line, and has made several acquisitions. Things worsened with the expiry of its Celebrex and Zyvox last year.
Therefore Pfizer Inc. has been acquiring companies as well as developing new drugs to offset its declining revenues in the coming years. Pfizer Inc. launched Ibrance for cancer this year, which delivered outstanding sales of $38 million, as compared to the analysts’ expectations of $22 million. The drug is expected to generate over $3.39 billion by 2018.
Moreover, as per the report from Bidnessetc, the company has over 10 drugs in Phase III stage and 12 in Phase II stages. The report also says that if three of its biosimilar drugs gets FDA approval, than Pfizer Inc. can benefit through its strong brand presence, as the biosimilar market is expected to explode to $20 billion by 2020.
Recently, the company has also targeted the injectable business by acquiring Hospira Inc. for over $16 billion. By 2020, the generic sterile injectable business is expected to grow to $70 billion. JP Morgan analysts estimate the company’s Palbociclib drug for breast cancer to deliver over $4 billion revenues in 2020, if it gets FDA approval.