AstraZeneca Deal Is the Boost Pfizer (NYSE: PFE) Stock Needs

Rejection has hit Pfizer Inc. (NYSE: PFE) stock again...

British pharmaceutical company AstraZeneca Plc (NYSE ADR: AZN) once again rebuffed a takeover bid from rival Pfizer today (Tuesday) when the company announced its forward strategy and revenue projections.

AstraZeneca officials projected annual revenue to increase by 84% by 2023. The company expects sales to reach $84 billion per year by that time, which is up from $25.71 billion in 2013.

PFE stock has slipped today, down about 2% to $29.37.

PFE stockPfizer upped its previous offer to $106 billion last week, but AstraZeneca officials rejected the offer, saying that it "substantially" undervalued the company.

AstraZeneca's Chief Executive Pascal Soriot told The Wall Street Journal last week that the company's drug pipeline was underappreciated. According to Soriot, the company has 11 drugs that are in the final stages of clinical testing, and its portfolio of cancer drugs is a major strength.

AstraZeneca estimates that annual sales from its upcoming drugs could be between $23 billion and $63 billion, depending on which receive approval. However, it's nearly impossible to predict which drugs will actually receive regulatory approval.

While AZN shareholders were likely pleased by the company's outlook, analysts at the brokerage firm Jefferies wrote a note to clients saying that AZN's projections are "overly optimistic." Additionally, AstraZeneca does expect revenue to remain flat through 2017, as the company's patents on Nexium ($4 billion in 2012) and Crestor ($6.2 billion in 2012) expire in 2014 and 2016, respectively.

Losing those patents will hurt, but the company has projected that by 2023 its blood-thinning drug Brilinta should bring in $3.5 billion annually. AZN also has high hopes for its various diabetes and respiratory drugs. Both divisions are expected to bring in $8 billion annually by 2023.

While AstraZeneca's price projections may be considered high by some analysts, a strong pipeline is a major reason why Pfizer wants AstraZeneca. But it isn't the only reason...

Why Pfizer (NYSE: PFE) Wants AstraZeneca

Completing the second-largest pharmaceutical deal of all time (behind the Glaxo-SmithKline $189 billion deal in 2000) should jumpstart PFE stock.

In the last 12 months, PFE stock has gained just 3% compared to a gain of 16% for the S&P 500 and 10% for the Dow Jones Industrial Average. In 2014, the stock has dipped almost 4%.

As mentioned, one of the major motives for the deal is AZN's pipeline, which looks even more attractive to Pfizer after seeing PFE's most recent sales figures. Last year, PFE saw its sales drop 6% to $51.6 billion. While AZN's sales also dropped 6% in the same time, the deal would be more about future sales than past sales - and it's clear AZN is optimistic.

Additionally, by acquiring AstraZeneca, Pfizer would be able to reincorporate in the United Kingdom. And that's a move that would save the company billions of dollars a year in corporate taxes. Currently, Pfizer pays a corporate tax rate of 27% in the United States. In the United Kingdom, the corporate tax rate is expected to soon drop to 20%.

Additionally, moving to the U.K. would allow Pfizer to spend its overseas cash without being taxed heavily. The New York Times recently estimated that 70% to 90% of PFE's $49 billion in cash is held overseas. Currently, the company is taxed heavily whenever that cash is brought into the United States.

For now, the deal between Pfizer and AstraZeneca appears far off as the U.K. pharmaceutical company digs its heels in against a takeover. But the potential deal is too good for Pfizer to give up on. If things continue with the same results, a hostile takeover bid may soon materialize.

How do you think this deal would impact PFE stock? Join the conversation on Twitter @moneymorning using #Pfizer or $PFE.

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