Evidence Pfizer Could Revisit GlaxoSmithKline Or AstraZeneca Deals If Allergan Falls Through

Despite the proposed merger agreement with Allergan plc Ordinary Shares AGN, analysts have been talking about other potential moves Pfizer Inc. PFE could engage in if the deal were to fall through.

Based upon the imbalance between the proposed merger pricing of Allergan (at an implied $333.24/share), and the current trading price of Allergan ($232 Tuesday afternoon), analysts have observed a substantial risk that the deal will not come to fruition after all.

Analysts Look To Other Names In The Space

Analysts at Jefferies and Bernstein have both offered up GlaxoSmithKline plc (ADR) GSK and AstraZeneca plc (ADR) AZN as potential targets Pfizer should consider.

Related Link: Betting On The Pfizer-Allergan Merger? You Now Have A 35% Arbitrage Opportunity

Jefferies stated, "Should Pfizer management determine that an inversion with Allergan no longer make [sic] sense for the company, we still see other potential options. GlaxoSmithKline (GSK LN, 1,428p, Hold), or potentially even AstraZeneca (AZN LN, 2,971p, Hold) second time around could be considered, given that they are not impacted by the new three year size rule. However, the inversion story feels tired now that the Treasury has twice now thwarted Large-Cap Pharma deals."

Bernstein for its part commented, "If the AGN deal were to fall through, it would presumably be because PFE views inversion as ‘dead,' thanks to the new Treasury regulations. Alternatively, it might just mean that AGN becomes too small under the new rules, such that the 60:40 threshold is not met (if shareholders of the merged entity own less than 40 percent of the new company, then the tax benefits diminish).

"In this case, if PFE were still destined to invert, it could theoretically revisit AZN or GSK, which would be large enough to satisfy the 60:40 threshold."

Alternately, "PFE could walk away from the idea of inverting altogether," Bernstein offered. "It could rely instead on the usual playbook which is to acquire large targets in the biopharmaceutical space in a more traditional way."

Jefferies has a $42 price target on Pfizer and rates the company at Buy.

Bernstein rates Pfizer at Outperform with a $36 price target.