Biotech Values

[Titan V]

Could Pfizer Make Cash Bid for Bristol-Myers?
http://www.barrons.com/articles/could-pfizer-make-cash-bid-for-bristol-myers-1490715108

Credit Suisse
One of the most common topics of discussion in our investor meetings remains the question around whether Pfizer or another biopharma company may be interested in acquiring Bristol-Myers Squibb in the next nine-12 months, given some of the challenges Bristol-Myers is facing and the activist involvement in the name.


We previously published in our “Debate Around BMY Continues” note that we believe an acquisition by Pfizer (ticker: PFE) in particular would be unlikely given some of Bristol-Myers (BMY)-specific and more macro uncertainties that currently exist, although Pfizer commentary in our recent Meeting with Management and at other investor conferences makes us think they are certainly looking at all possibilities when it comes to business development.

To supplement our previous work, our HOLT [proprietary Credit Suisse platform] colleagues have now taken a look at the possibility of Pfizer buying Bristol-Myers from a HOLT perspective and do see the deal as providing an opportunity for value-creation.

Overall, HOLT suggests that an acquisition of Bristol-Myers by Pfizer would have a positive impact on Pfizer’s return-on-capital profile when assuming industry average synergies for a deal of this nature. An all-cash deal (assuming Pfizer pays a 25% premium and can extract synergies of 30% of Bristol-Myers’ operating expenses) would lead to about $5 billion, or approximately 80 cents per share, in value-creation, according to HOLT. If instead of an all-cash deal, Pfizer issues shares to pay for a portion, dilution from issuing “undervalued” shares will offset the initial value-creation. A deal partially financed with an 18% stock issuance would be a breakeven for Pfizer shareholders.