Thursday, June 16, 2005

This shopper doesn't shy away from throwing money

Pfizer announced its buyout of Vicuron (MICU) today, in an all cash deal valued at $1.9 billion. Why Pfizer would shell out a 80% premium is beyond me, but I should admit that I am in no position to evaluate potential revenues from Vicuron's upcoming drugs. The premium still looks excessive. Was there a threat of a competing bid that forced Pfizer to make this incredible offer ? If so, will the other bidder(s) go after alternate targets ?

As I have said repeatedly, the pharma majors have huge piles of cash and mostly empty pipelines and expiring patents. The best they can do is to buy up-and-coming players.This game is just beginning.

I had not paid much attention to Vicuron, especially since there has been no insider buying recently. I do own a few shares of Intermune (ITMN), which has seen strong insider buying of late and I still rank it as a buy. Another worthy candidate is Cubist (CBST), which also ranks as a buy but less strongly since the insider purchases haven't shown up. Pfizer competitors will surely be looking at these two.


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