Pfizer's Ian Read Sees No Size Limit to M&A, But Says Industry Is on Pause
Pfizer PFE CEO Ian Read

Pfizer (PFE) CEO Ian Read said Tuesday that the pharmaceuticals giant is not limited by size on the M&A front after recently announcing it was scrapping plans to break into two independent companies.

"Our appetite for continued acquisitions or investments in business development remains strong," Read told investors on a conference call discussion of third quarter earnings, emphasizing that the company's corporate strategy will include a combination of buybacks, dividends and investing in its portfolio. 

Having evaluated for years the possible splitting of its established, older drug portfolio that makes up Essential Health, and its newer, patent-protected drugs, otherwise known as Innovative Health, Pfizer in late September called of plans to move forward with any such action.

Read reiterated on Tuesday that while he doesn't believe Pfizer is limited in terms of the size of deal it can do, he views the whole industry as being "on pause right now" when it comes to major business development until after the November election, pointing to matters of international tax policy reform.

"I would hope they [Congress] would reform it not only for repatriation but to put us on a level playing field with foreign companies," Read said on the call. 

In addition to M&A, the CEO also shared his thoughts on industry issues including pharmacy benefit managers and drug pricing.

Whether the market will see any material change in the relationship between pharmaceutical companies and pharmacy benefit managers, including the size of rebates, net pricing and general focus on pricing transparency, will also require legislation and depends on the new administration, Read said. 

Pharmacy benefit managers, or PBMs, such as CVS Corp. (CVS) and Express Scripts (ESRX) , serve as intermediaries between insurance companies and pharmaceutical providers, negotiating the prices of medications. 

Though PBMs have served as an important contribution to facilitate negotiations, Read asserted on the call: "I think they [rebates] are now becoming less helpful in getting cost effective solutions to patients." 

Instead of rebates, Read said he'd prefer volume-based agreements that determine price.  

When asked about Pfizer's pricing strategy, Read said he sees no reason for the company to change its approach and that he anticipates annual pricing increases for its products in the plus-or-minus low single digits, as they've seen in previous years. 

"We've always priced responsibly," Read said.

In posting third-quarter results Tuesday morning, the New York-based company reduced its full-year earnings outlook to to between $2.38 and $2.43 per share, down from $2.38 to $2.48 per share, alongside weaker-than-anticipated quarterly results.  

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