PFIZER to BUY ALLERGAN

Cramer's M&A Plays
Posted By:Tom Brennan
Topics:Mergers & Acquisitions | Biotechnology | Stock Picks | Stock Market
Sectors:Biotechnology | Pharmaceuticals and Biotechnology
Companies:Allergan Inc | Pfizer Inc | Omrix Biopharmaceuticals, Inc. | Mentor Corp | Johnson and Johnson
Cramer praised Johnson & Johnson during Wednesday’s show for the company’s smart acquisitions of Mentor and Omrix. He’d like to see other cash-heavy firms follow J&J’s lead.

Massive selling caused by hedge and mutual fund redemptions have driven down stock prices enough to make strong companies such as these attractive buys. Breast-implant maker Mentor [MNT 30.60 -0.14 (-0.46%) ] and Omrix [OMRI 24.89 -0.04 (-0.16%) ], which produces surgical sealants, were trading as high as $50 and about $41, respectively, but J&J [JNJ 57.32 0.49 (+0.86%) ] picked up each for only $31 and $25, respectively, thanks to those fund-fueled sell-offs.

There are more than just a few companies with pockets full of cash standing on the sidelines when they should be out shopping, Cramer said. So for the rest of the week he’s going to play matchmaker, coupling suitors with potential mates. First up: Pfizer [PFE 16.62 0.60 (+3.75%) ] should buy Allergan [AGN 36.20 1.39 (+3.99%) ].

Actually, any big pharma company with sufficient reserves could snatch up Allergan at these levels, but Cramer thinks Pfizer specifically could use a jolt in growth right now. Allergan’s a market leader in what might be called Hollywood cosmetics – not that New York, Miami or even Chicago would be exempt – having its perfectly manicured hands in everything from breast implants to Botox to stomach bands and more. And best of all AGN has been cut in half since mid January, dropping to $36 a share from $70.

Pfizer has $26 billion in its coffers, which is more than double what the company would need to buy Allergan. In return, on top of Allergan’s fabulous brands, Pfizer would inherit a 14% long-term growth yet. That easily beats the 1% growth rate Pfizer has now.

Investors looking to trade such a buy might do well if the J&J purchase of Mentor is any guide. Mentor fetched a price equal to just under 20 times earning. If Allergan earned the same, then AGN jumps to $54 a share. And even if a deal doesn’t happen, there’s potential for some heavy cost-cutting here, research firm Cowen & Co. said, which would offset any recession-related loss in sales at Allergan.

Check back Thursday for Cramer’s next two potential M&A plays.

Sounds like a great deal! Heard Cramer talk about this today on the radio. What do you think???

This explains the tense behavior within the organization right now. The attitude of scrutiny right now is like being an inmate at San Quentin

This explains it

I agree with the above poster........the goals were not realistic here for what exists in our current pharma and acquistions. The word of this on the street even though it came from an investor figure on TV, will be what every customer talks to you about in next 6 months.

You will have to work around this topic before you ever reach your desired goal

I would not be surprised if some inside are already aware of the strong possibility that this will happen.

Hmmmm interesting

Allergan's image always surrounds around botox. That has been an image they can never shed. A buyout like this would offer some credibility with the organized customer.

Maybe we will stop getting analyst reports sent to us now......stock options are under water all over.....so let the buyout happen

Let it happen!!!

we've all talked about Alcon becoming big pharma, it's now just a matter of time before we and all "small to midsize" companies get gobbled up to the big show. If it helps the bottom line, which it should, just to it and let it happen.

Pfizer needs a game changer, and Allergan is not the answer. With this economy, a botox challenge from reloxin, managed care issues with urology and the cash businesses of breast and lap band down, why would Pfizer take this on? There is no immediate upside to spend roughly 20x earnings. Besides, Cramer is a moron-didn't he say buy Lehman the Friday before the roof fell in?

Didn't Donny Pearl come from Pfizer????

Originally Posted by Anonymous

Pfizer needs a game changer, and Allergan is not the answer. With this economy, a botox challenge from reloxin, managed care issues with urology and the cash businesses of breast and lap band down, why would Pfizer take this on? There is no immediate upside to spend roughly 20x earnings. Besides, Cramer is a moron-didn't he say buy Lehman the Friday before the roof fell in?

With this industry expect anything. All these companies are in the M&A mode right now.
May want to think about putting higher % in the allergan stock fund.

Cramer is such a Moron that Allergan's ego put him stories about his praise of Allergan on their intranet site.....I guess we won't be seeing him their anymore.....I guess no more once a week visits with Pyott on the cable network

Leave now. Pfizer will take your once proud company and run it into the ground. Pfizer's reputation amongst physicians has fallen. I work on the inside at another pharma company and the market research data ranking the effectiveness of sales professionals has shown that Pfizer reps are not as highly rated as they were years ago.

If this happens our jobs and lives will be ruined. Pfizer turns everything they touch to s##t.

This is all I hear now from my customers

Who cares...good grief. There's always a rumor like this going around. Pfizer can buy American Airlines for all I care.

Get back to work, No DEAL!!

Why would Pfizer want Allergan? Pfizer goes after products with $1 billion or more in sales. It took Botox a long time to get to that point, and they would also pick up all of the baggage along the way.

Diverse portfolio. More and more pharma companies are buying or merging with each other. If they feel that they can get more out of a company then they put in, it might be a good deal. Right now it's about survival in a competitive market dictated by the governement and insurance that is eatting away at us all.

Allergan is already diverse. The only divisions we have that are effected by insurance and reimbursement are urology and opthalmology (I assume). Breast, facial aesthetics and topical aesthetics are all cash pay.

Originally Posted by Anonymous

If this happens our jobs and lives will be ruined. Pfizer turns everything they touch to s##t.

I couldn't agree more. I was out on the street with the Searle/Pharmacia/Pfizer deal.
It took about 4 years to recover from that.
Pfizer Business Plan
1) Acquire a well run profitable company
2) Strip them of their intellectual property
3) Divest themselves of the talent that developed the pipeline,
4) Run the products into the ground
5) Look for another vulnerable company and repeat.
Pfizer doesn’t make drugs, they make acquisitions.

You people are idiots. Pfizer is looking to buy Amgen.

Deutsche analyst: Pfizer likely to bid for Amgen
December 17, 2008 — 11:00am ET | By John Carroll
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Who's next on the biotech buyout hit list?

Noted Deutsche Bank analyst Barbara Ryan says that Pfizer is likely to make a major play to establish itself in biotechnology, with a bid for Amgen likely. Discussing the challenges that pharma faces, Ryan told clients in a conference call that Pfizer has a lot of cash in the bank and needs to do something dramatic in the face of looming generic competition for its blockbuster drugs.

"The most likely company to act first is Pfizer largely because they have the biggest cliff to mount," Ryan said. "The deal we think makes the most sense is Amgen. Pfizer has talked about being a player in biotech and oncology...They can't really pussyfoot their way around this. We believe they've got to put a big stake in the ground, and Amgen would do that."

As the Dow Jones report notes, a play for Amgen would require a huge offer. Amgen is valued at $61 billion and would demand a hefty premium.

Originally Posted by Anonymous

Deutsche analyst: Pfizer likely to bid for Amgen
December 17, 2008 — 11:00am ET | By John Carroll
Related Stories
Who's next on the biotech buyout hit list?

Noted Deutsche Bank analyst Barbara Ryan says that Pfizer is likely to make a major play to establish itself in biotechnology, with a bid for Amgen likely. Discussing the challenges that pharma faces, Ryan told clients in a conference call that Pfizer has a lot of cash in the bank and needs to do something dramatic in the face of looming generic competition for its blockbuster drugs.

"The most likely company to act first is Pfizer largely because they have the biggest cliff to mount," Ryan said. "The deal we think makes the most sense is Amgen. Pfizer has talked about being a player in biotech and oncology...They can't really pussyfoot their way around this. We believe they've got to put a big stake in the ground, and Amgen would do that."

As the Dow Jones report notes, a play for Amgen would require a huge offer. Amgen is valued at $61 billion and would demand a hefty premium.

Now that makes more sense

Originally Posted by Anonymous

Now that makes more sense

Yes it does, but somebody big will buy Allergan whether or not it is Pfizer

If Pfizer or some other big pharma company buys Allergan they will ruin any Aesthetic Division/Product this company has. They have no concept of direct selling and or device and will use a big pharma model and run these divisions into the ground it will be a complete nightmare !

Originally Posted by Anonymous

Yes it does, but somebody big will buy Allergan whether or not it is Pfizer

Thanks for the comment. Hey everybody, now that the Pfizer rumor is disproven (as they all usually are), it appears "Somebody Big Pharmaceuticals" is going to buy us! Oh my God! Run for the hills!

Well lets just all be clear...NO ONE would BUY ALlergan for its Pharmaceutical books of business.....because they are bottom of the barrel......They would only buy for the cash aesthetic side

Originally Posted by Anonymous

Well lets just all be clear...NO ONE would BUY ALlergan for its Pharmaceutical books of business.....because they are bottom of the barrel......They would only buy for the cash aesthetic side

Speaking on behalf of all other pharmaceutical companies on why they would buy Allergan, just for the Aesthetics business...another brilliant insight. You're right I'm sure and we're ALL very clear now!

Originally Posted by Anonymous

Speaking on behalf of all other pharmaceutical companies on why they would buy Allergan, just for the Aesthetics business...another brilliant insight. You're right I'm sure and we're ALL very clear now!

Well, we know they would not want the urology division. Talk about a waste of money!