Pfizer (PFE) Should Buy Biogen (BIIB) Instead - BMO

BMO Capital analyst Alex Arfaei said while there is significant market speculation about at a Pfizer (NYSE: PFE)/Bristol-Myers Squibb (NYSE: BMY) merger they argue that a Pfizer/Biogen (NASDAQ: BIIB) merger makes more sense.

Arfaei notes Pfizer has a significant gap in neurology, and argues the company cannot afford to be behind in IO and Alzheimer's disease as its peers (e.g. BIIB, MRK, AZN, LLY) have pivotal trials reading out in 2019-2020.

"We believe Biogen's Aducanumab has shown very promising data, the pipelines are complementary, and Pfizer could probably manage Biogen's mature neurology franchise more efficiently. BIIB's valuation and MS headwinds may provide Pfizer an opportunity for this deal," the analyst commented.

Arfaei believes the market is currently valuing Biogen’s Alzheimer’s assets at ~$10B ($45/share), which they argue is modest given Aducanumab’s potential.

"Pfizer may have an opportunity to leverage near-term volatility associated with Biogen’s MS franchise and execute this deal during the next 6-9 months before a potential Aducanumab interim look (2H18) and phase-3 readout in 2H-2019," the analyst adds.

The firm reiterated an Outperform rating and price target of $39 on PFE.

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 $35.18 yesterday.

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