Pfizer is a shark that can’t stop feeding

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So says John LaMattina, a former head of research at Pfizer:

The only way for a shark to survive is to keep going forward. To maintain its leadership, Pfizer will again need to make a major acquisition in the next 4 – 5 years. Given Pfizer’s policy that a CEO must retire at age 65, this duty will likely fall to the 60 year old Read’s successor. Consider it a right-of-passage for a Pfizer CEO. Care to speculate as to what company would be a prime take-over target in 2019? Bristol-Myers Squibb? Lilly? Perhaps the unthinkable, Merck ? It will be fascinating to watch this play out. But given its size and commitment to internal R&D, this is Pfizer’s future.

LaMattina points out that Pfizer is so big, and needs so many new products to maintain its revenue (let alone grow!) in the face of patent expirations, that it has to make large acquisitions. History is littered with behemoths that tried a continuous acquisition strategy, but stumbled and died. Why would Pfizer be any different? This round with AZ is a bit special, since a huge tax arbitrage play will justify a large part of it. But in general what could fund this strategy for quite a few more years is the huge R&D expense that Pfizer can cut from each acquired pharma company, in addition to the usual operational synergies that come with big mergers. I hope I’m wrong, but Pfizer seems on track to become a much larger, relatively unleveraged version of Valeant (or is it the other way around?).

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