Deutsche Bank Casts Doubt On Pfizer's Rumored Takeover Approach To Bristol-Myers

Gregg Gilbert of Deutsche Bank would be surprised if Pfizer Inc. PFE approaches Bristol-Myers Squibb Co BMY with a takeover bid at this stage.

The brokerage issued the comment after Street Insider said Roche Holding Ltd. (ADR) RHHBY, Novartis AG (ADR) NVSand Pfizer could be interested in buying Bristol-Myers, while Gilead Sciences, Inc. GILD is also seen as a potential suitor.

Given the size of Bristol-Myers, which has a market cap in excess of $90 billion, the rumored deal would be one of a kind and would attract potential regulatory scrutiny. The Street Insider report pegs the potential deal value at $120 billion, or $72 per share.

“While we assume PFE is constantly assessing various deals large and small, and management has not been shy about acknowledging the potential for it to do a large deal in what is a fragmented industry with excess capacity, we would be surprised to see PFE make a move on BMY at this stage,” Gilbert wrote in a note.

The takeover rumors of Bristol-Myers come at a time when its stock has been hammered after the failure of a lung cancer drug trial and President Trump mulling possible avenues to slash the cost of drugs.

On the financial front, the company recently issued a mixed fourth quarter report that revealed an EPS miss of $0.04 along with a slight revenue beat. The company affirmed FY2017 outlook at the $2.70-$2.90 range versus estimates of $2.86.

Gilbert also pointed out the near-term uncertainty in the immuno-oncology area, on which Pfizer already has at least a partial strategy in place.

Last month, Bristol-Myers said it will not be pursuing accelerated regulatory approval for its lung cancer drug Opvido/Yervoy following disappointing trial results.  At the same time, Merck & Co., Inc. MRK announced favorable results for Keytruda, which is a competing lung cancer drug.

Related Link: Which Pharma Players Dominate The Lung Cancer Space?

“We believe that if PFE management were to deploy $90bn or more on a deal, it would prefer to have a more diverse set of value drivers (in addition to a cost rationalization story),” Gilbert continued.

The analyst also noted Pfizer already has a very significant stake in the large and growing Eliqius opportunity.

As such, Gilbert maintained its Buy rating on Pfizer with a $40 target price and reaffirmed his Hold rating on Bristol-Myers at a price target of $42.

Market News and Data brought to you by Benzinga APIs
Comments
Loading...
date
ticker
name
Price Target
Upside/Downside
Recommendation
Firm
Posted In: Analyst ColorNewsRumorsM&AAnalyst RatingsDeutsche BankGregg Gilbert
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!