BMO 'Neutral to Positive' on Pfizer's (PFE) Medivation Takeover

August 22, 2016 12:09 PM EDT
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BMO Capital analyst Alex Arfaei weighed in on Pfizer's (NYSE: PFE) $14 billion takeover of Medivation (NASDAQ: MDVN), saying he is Neutral to Positive on the deal despite the "arguably rich" multiple.

"... Xtandi and pipeline complement Pfizer's oncology portfolio well and significantly strengthen Pfizer's Innovative Health segment," Arfaei said.

The analyst notes Xtandi sales (booked by Astellas) over the past four quarters were $2.2 billion, while JNJ's Zytiga sales were $2.3 billion. Also, Xtandi (up 22% in 2Q) has recently been growing at a faster rate than Zytiga (10% in 2Q) on a superior competitive profile.

In addition, Medivation's Talazoparib potentially strengthen Pfizer's leadership in breast cancer. Also, importantly, the deal strengthens Pfizer's Innovative Health segment.

"The addition of Xtandi and a key pipeline asset in Talazoparib should alleviate concerns about Pfizer's Innovative segment, including overreliance on Ibrance and slowing Prevnar sales," he said. "With the Medivation deal and the recent Anacor acquisition, we have increased confidence in PFE's Innovative portfolio and pipeline and reiterate our Outperform rating."

Outperform price target of $40.00

For an analyst ratings summary and ratings history on Pfizer click here. For more ratings news on Pfizer click here.

Shares of Pfizer closed at $34.98 yesterday.

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