Pfizer likely to make second approach for AstraZeneca, says Citi

22nd Apr 2014 09:51

Shares in AstraZeneca (AZN) were rising strongly on Tuesday morning in London on the back of speculation that US pharmaceutical peer Pfizer could make a 60bn-pound takeover bid for the British-Swedish company.The rumours, first reported by The Sunday Times, said that the two parties had held informal talks over recent weeks, leading to a tentative $100bn approach for AZN, representing a 25% premium to the recent share price. AZN, however, is reported to have rejected the offer.According to analysts at Citigroup, Pfizer is likely to "push aggressively ahead with a second approach". They also said that the reported offer was "very likely genuine"."AZN may seek a merger of equals as a defence strategy against Pfizer or other larger US multinationals," the bank said."US-based Amgen and Abbvie both have active oncology programs, although currently lack a broad immune-oncology portfolio. We note AZN's pre-existing R&D relationship with Amgen for auto-immune disease."As for Pfizer's side of the deal, Citi said that an acquisition of AZN would fit the US company's key strategic goals for immuno-oncology (IO) and autoimmune disease. "The pharmacologic ability to up or down regulate the immune system to control cancer (immunotherapy) or control auto-immune diseases will drive industry returns over the next decade. "We are proud zealots in our optimism over the medical and commercial potential for immunotherapy. AZN's IO pipeline of checkpoint agents would catapult Pfizer into a top-three IO company."Citi kept a 'neutral' rating and 3,500p target price for AZN.The share price was 7.6% higher at 4,070p by 10:00 on Tuesday.BC