Last night the Wall Street Journal broke the news that Pfizer and Allergan are considering merging. I’m not a fan of huge pharma mergers, never have been, but this one at least isn’t as offensive as some of them. That’s partly because, in the words of FierceBiotech‘s John Carroll (on Twitter) that Allergan at least doesn’t have as huge an R&D effort for Pfizer to demolish. And since Allergan is incorporated in Ireland, this is a way for Pfizer to do what it really seems to need to do most – deal with its tax situation, which was the driving force behind their attempt to take over AstraZeneca. Pfizer has gigantic amounts of money piling up in its non-US-based operations, and if they repatriate it, they’ll expose themselves to some of the highest corporate tax rates in the industrialized world. (As an aside, does Bernie Sanders want to cut corporate taxes all the way down to Scandanavian levels? Just a thought.)
As the story has it (here’s a non-gated summary from Reuters), Pfizer approached Allergan with the idea, who’s apparently taking it seriously and not fleeing in terror like AZ did. Earlier rumors has Pfizer going after GSK or Shire (for the same tax reasons), and their shares are actually dropping a bit now that their investors are perhaps missing out on a big Pfizer payday. Allergan’s revenues are at least increasing strongly, which is a lot more than you can say for Pfizer’s, but this deal would create the biggest behemoth yet in the drug business. And as someone in that Reuters piece says, when you’re as big as Pfizer, a deal like this is one of the only things that can really add to the growth of your company – so what situation would they be in afterwards? This whole idea just continues the Pfizer strategy of the last twenty-odd years. It means, I think, that Ian Read may have come into his job as CEO talking about doing things differently, but that now that he’s experienced Pfizer’s situation from every angle, he’s decided that all he can do is more of what got them to this state in the first place. Won’t his eventual successor have fun, though!
At any rate, these talks are said to be preliminary. But Pfizer is going to buy someone, and it’s going to be someone large and in another country. That much seems clear (as it has been for a while now). It might well be Allergan, but if not, then hey, there are always other drug companies to buy. Gotta buy someone. Can’t just sit there. Nothing else left to do.