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By Ben Hirschler
LONDON, April 21 (Reuters) - Pfizer Inc may comeback to bid for British drug company AstraZeneca Plc after its reported 60 billion pound ($101 billion) takeoverapproach was rejected, since a deal could make sense for theU.S. pharmaceuticals giant as it seeks to build up its cancerfranchise.
In addition to adding promising - though still risky -experimental medicines known as immunotherapies that boost thebody's immune system to fight tumors, acquiring AstraZenecacould also generate significant cost savings, according toindustry analysts.
As a result, a deal at around a 25 percent premium to thecurrent share price funded by cash, cheap debt and some stockcould boost Pfizer earnings immediately, they believe.
Both companies have declined to comment on a report in theSunday Times, which cited senior investment bankers and industrysources saying that Pfizer approached the Britishpharmaceuticals group about a deal. The newspaper said no talkswere currently under way after AstraZeneca resisted theapproach.
Citi analyst Andrew Baum said he believed the report was"very likely genuine" and Pfizer could return to the fray, giventhe attractiveness of AstraZeneca's pipeline of cancer drugs,its expertise in autoimmune diseases and the scope for takingout costs.
"We anticipate Pfizer to push aggressively ahead with asecond approach," Baum wrote in a research note on Monday,adding that AstraZeneca might seek to structure any deal as amerger of equals as a defense strategy.
Betaville, a British financial blog, on Monday saidAstraZeneca had hired Goldman Sachs and Morgan Stanley to act as"defense" advisors in the event Pfizer makes a new effort toacquire the London-based drugmaker.
The two investment banks already act as AstraZeneca'scorporate brokers.
The blog also said that Pfizer may be working with JP Morganto work on any potential bid. AstraZeneca and Pfizer declined tocomment on the investment bankers, and officials at GoldmanSachs and Morgan Stanley could not immediately be reached.
Pfizer shares closed up 2 percent, while AstraZeneca sharesrose 8.8 percent, both on the New York Stock Exchange.
Pfizer has a long track record of making major acquisitions,with the $68 billion purchase of Wyeth in 2009 its last majordeal, after earlier acquisitions of Pharmacia and WarnerLambert.
The drugmaker has more recently been divesting certainoperations and mega-mergers have fallen out of fashion in thepharmaceuticals industry following scepticism about how wellsome of them have worked. But Chief Executive Officer Ian Readhas said he would still consider a large deal that made sense.
Read also has an incentive to buy assets overseas ratherthan in the United States since Pfizer has tens of billions ofdollars accumulated through foreign subsidiaries, which ifrepatriated to the U.S. would be heavily taxed.
OTHER BIDDERS
A Pfizer move on AstraZeneca might flush out other bidders.U.S. biotech giant Amgen Inc already has a tie up withAstraZeneca in autoimmune medicines to treat diseases such aspsoriasis and severe asthma.
Novartis AG and larger GlaxoSmithKline Plc have also been mentioned in the past as potential suitors,although GSK has in recent years said publicly it is notinterested in making a large acquisition, while Novartis is inthe middle of strategic review and already has a presence incancer immunotherapy.
Mark Schoenebaum, an analyst at ISI, agreed cancerimmunotherapy was likely the main lure for Pfizer, since thefield is expected to become one of the biggest areas of modernmedicine in the next few years.
However, Mark Clark at Deutsche Bank said Pfizer would bemaking something of a "leap of faith" since AstraZeneca's mostexciting cancer drugs are still at an early stage ofdevelopment.
Pfizer has a highly promising breast cancer drug inlate-stage development called palbociclib but otherwise itscancer portfolio is relatively weak.
"Notably, Pfizer appears to be nowhere in the importantfield of immuno-oncology, which Bristol-Myers Squibb,Roche, Merck & Co and AstraZeneca currentlydominate," Schoenebaum said.
Bristol, Roche and Merck are viewed as being ahead ofAstraZeneca in the new cancer field but the British firmbelieves it can make up ground by pioneering drug combinations,including the use of a medicine known as tremelimumab that itlicensed from Pfizer.
AstraZeneca and its rivals will present the latest clinicaldata on promising new cancer drugs at the May 30 to June 3annual meeting of the American Society of Clinical Oncology.
DRUG PIPELINE
The London market was closed on Monday for Easter but thetalk of Pfizer's interest in AstraZeneca is likely to overshadowdealings when trade resumes on Tuesday.
AstraZeneca Chief Executive Officer Pascal Soriot, who hasbeen credited for progress in rebuilding the company's new drugpipeline since taking over in 2012, fuelling a rally in theshares, will also come under pressure to address the reportedPfizer approach when he presents half-year results on Thursday.
Speculation over such a takeover, which would be potentiallythe biggest ever foreign takeover of a British company, islikely to trigger concerns about jobs in Britain'spharmaceuticals sector, which is viewed as a key industry by thegovernment but which has been under pressure.
AstraZeneca has already laid off thousands of scientists andother staff as it shrinks its cost base to cope with a fall insales due to patent losses on blockbuster medicines.
With heartburn treatment Nexium losing U.S. patentprotection next month and cholesterol fighter Crestor facingpatent expiry in 2016, the decline in sales is expected tocontinue for several years.
In an attempt to reshape the company, Soriot is currentlymoving its research and corporate headquarters to Cambridge,England. Pfizer has also made the university city a research hubafter shuttering a large research site in Sandwich, southernEngland.
The Cambridge connection is only one link between Pfizer andAstraZeneca, highlighting how the companies know each otherwell.
AstraZeneca's head of innovative medicines Mene Pangalosalso used to work at Pfizer and the two firms are familiar witheach other's products from working together on projects, such asa pioneering of a new kind of clinical trial for cancer drugsannounced last week. (Editing by Jane Merriman, David Holmes and Lisa Shumaker)
