Although trading near its 52-week high these days, and boasting a significant cash influx through the sale of its non-core businesses, Pfizer Inc. (PFE) still has the task ahead of rebuilding the company's drug development program with a slew of big-name drugs coming off label, including the blockbuster Lipitor that lost its patent protection last year.
It has been mentioned, however, that Pfizer will initiate some share buybacks and utilize the new found spare cash to boost investor value in other ways, but it's also fair to speculate that the pharmaceutical powerhouse might look to complete a key acquisition or two - and the season for such a move is ripe.
GlaxoSmithKline (GSK) last week threw an offer the way of Human Genome Sciences (HGSI) for a $13 per share - which equates to roughly $2.6 billion. At the time HGSI was trading for just above seven dollars, so the offer came at a significant premium and was even deemed as not enough by the company, who quickly rejected the offer and is probably awaiting a follow-up offer.
The trend of quick rejection by companies having received buyout bids in the sector has already been set and documented over the past few weeks, so Human Genome isn't the only company being highly confident in its value. Illumina Inc. (ILMN) rejected two offers from Roche Holding AG (OTCQX:RHHBY) a few weeks ago, one for $44.50/share and the other for $51/share, and Amylin Pharmaceuticals (ALMN) turned away Bristol-Myers Squibb Company (BMY) last month on a $3.5 billion, $22/share offer.
Rumors surrounding additional offers have kept Amylin traders quite busy, with share up over ten percent during Monday's trading session on renewed buyout talk. Human Genome traded relatively flat through the day.
With Pfizer's significant cash infusion, it wouldn't surprise anyone to see the company join the ranks of acquiring companies on the move. PFE already has relationships with a few smaller, developing companies - such as Lpath Inc. (LPTN) - that would make for nice, cheap acquisitions to start pumping the pipeline full of technology and new product candidates, but it would also be expected to see a move towards closer-to-market candidates and/or companies who might already have a product on the market, although still in the early stages of full commercialization.
Synergy Pharmaceuticals (SGYP) is another example of an earlier-stage company that could be had for a relative fraction of its market potential right now. Boasting only a market cap of just over two hundred million, this company's main product - Plecanatide - is more than halfway through a Phase II/III trial that - if successful - would position the product to be approved in the multi-billion dollar chronic idiopathic constipation and constipation-predominant irritable bowel syndrome (IBS-C) markets. Its chief competitor, Ironwood Pharmaceuticals (IRWD), is looking to have a similar product approved, but received notice this week that the FDA will take an additional three months to review the case for approval. With results due at the end of this year, the Ironwood delay provides a significant amount of time for Synergy to make up some lapsed ground. This could be huge for SGYP, given that its treatment does not come with the same side effects of extreme diarrhea as IRWD's treatment.
Regardless of the strategy that Pfizer undertakes to replenish its pipeline, I think it's safe to say that Pfizer's plan to sell off its business assets not related to the core drug unit could have as much to do with preparations to enter the buyer's market as it does to carry out the share buybacks discussed in recent news articles. There's plenty of potential buyout stories out there with strong products that are positioned to enter multi-billion dollar markets, many of which might wet Pfizer's appetite, so the recent sales to bring in flush cash add to the already building speculation of the pharmaceutical sector's buying market.
Disclosure: No positions