At the heart of Pfizer Inc's pursuit of British drugmaker AstraZeneca Plc is a shortage of attractive products in its own research pipeline, aggravated by a recent series of disappointing drug launches, according to some industry analysts and money managers.
They view the $100-billion gambit for AstraZeneca as a return by Pfizer to the "mega-mergers" of the previous decade that allowed the U.S. company to benefit from huge cost savings and divert shareholder concern over low returns from its research and development.
As recently as last year, Pfizer Chief Executive Ian Read had virtually sworn off major dealmaking, wary of the criticism that huge transactions, such as the $90 billion purchase of Warner-Lambert in 2000, had not improved the company's prospects for innovative products.
"Pfizer is doing this from a position of weakness," said Michael Liss, a portfolio manager at American Century Investments who holds Pfizer shares. "If they had enough in their own pipeline, they wouldn't need to buy a big company; they'd be doing smaller collaborations."
Liss still believes the deal makes sense because it could create $4 billion in annual cost-savings for Pfizer, knock down its tax rate by rebasing the biggest U.S. drugmaker to Britain, and bring Pfizer potentially lucrative cancer drugs from AstraZeneca that work by stimulating the immune system.
"Pfizer's problem is they have a very thin drug pipeline," said John Boris, an analyst with Suntrust Robinson Humphrey. "And this is a very clear admission of that," he said, referring to Pfizer's two rebuffed efforts since January to buy AstraZeneca.
Read appeared to head off the criticism on Monday in discussing his efforts to reignite talks with Astra. He told investors that Pfizer had redoubled its efforts to buy AstraZeneca after favorable data from trials of new and experimental company drugs allowed it to act from "a position of strength."
But industry watchers questioned that description. Pfizer had hoped to turn a corner on its research when it won regulatory approvals over the past three years for kidney cancer treatment Inlyta and Xalkori for lung cancer after a decade without any significant new drugs. But both have seen weak sales.
Two newer treatments that had been deemed potential blockbusters with billions of dollars in sales, Xeljanz for rheumatoid arthritis and Eliquis to prevent blood clots that can cause strokes, have failed to take flight.
Experimental breast cancer drug palbociclib, which has been deemed Pfizer's most exciting product in development, is now expected