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In the note, Arnold names names. She thinks Pfizer [PFE
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] should buy Wyeth [WYE
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] or Amgen [AMGN
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]. Quite some time ago, Deutsche Bank analyst Barbara Ryan had suggested Pfizer look at Amgen as well.
Arnold claims Pfizer has four choices:
1. Go it alone.
2. Do a big deal.
3. Do a bunch of small deals.
4. "Divest, or even become an acquisition target." (I put the fourth choice in quotes to make clear it's a direct quote from Arnold's note.)
Arnold argues that a big deal offers the clearest path toward a higher share price. By Arnold's calculation, "PFE value is $29 with a Wyeth deal (and average synergies) and $26 with Amgen." She says a Wyeth deal would add to earnings in the first year and an Amgen deal would boost profit in the second or third year.
The word she uses is "accretive," but I don't like that Wall Street word or the opposite one, "dilutive." In plain English, a deal adds to or subtracts from earnings. Arnold also names six other biotechs and eight "specialty pharmaceutical" companies that passed her team's screening process as potential PFE targets: Biogen Idec [BIIB
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], Celgene [CELG
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], Cubist [CBST
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], Genzyme [GENZ
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], Gilead Sciences [GILD
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], United Therapeutics [UTHR
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], Allergan [AGN
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], Cephalon [CEPH
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], Endo Pharmaceuticals [ENDP
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], Forest Laboratories [FRX
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], Medicines Co.