Pfizer is leaning towards abandoning its $160 billion merger deal with Allergan. If the deal collapses, analysts say, both companies could pursue other acquisitions. Fred Katayama reports.
A source tells Reuters Pfizer is leaning towards ditching its $160 billion merger deal with Allergan, mirroring the bets made earlier by investors. Allergan's shares dropped as much as 17 percent after the Treasury Department issued new rules. Those regulations are aimed at curbing so-called tax-avoiding "inversion" deals like Allergan's. Pfizer and Allergan declined to comment. Reuters' Carmel Crimmins: (SOUNDBITE) CARMEL CRIMMINS, FINANCIAL SERVICES EDITOR, AMERICAS, REUTERS, (ENGLISH) SAYING: "Under the rules that came out last night, the way that Allergan has created itself the last three years means that it falls afoul of the rules on inversions now. Second of all, it disallows earnings strippings' which is one of the key reasons you would do an inversion in the first place. So you add both of those things together, really it makes this deal look very unappetizing." Pfizer's stock rose on the news. Some analysts say that minus the tax benefits, there's no reason for Pfizer to pursue the deal. If the deal falls apart, Credit Suisse says Pfizer could pursue companies involved in oncology or rare diseases. Piper Jaffray analyst David Amsellem says Allergan, a serial acquirer, could also go on the prowl. (AUDIO SOUNDBITE) DAVID AMSELLEM, ANALYST, PIPER JAFFRAY, (ENGLISH) SAYING: "So could Allergan potentially look at Biogen for instance, with an impressive commercial portfolio and a deep and innovative pipeline? I think that certainly is one possibility." Whatever becomes of the Allergan-Pfizer deal, experts say companies may look harder before considering an inversion deal or structure such deals differently.