Shares of Bristol-Myers Squibb (BMY) are slipping after Citi analyst Andrew Baum said Pfizer’s (PFE) CEO made it clear to him that the latter has no interest in acquiring the company in the absence of transformational data or a de-rating in the stock.

PFIZER ‘BACKS AWAY’: After meeting with Pfizer’s CEO, COO and CSO, Citi’s Baum told investors that the company’s chief executive made clear to him that Pfizer has no interest in Bristol-Myers in the absence of transformational data or a de-rating. Pfizer has high conviction in its current pipeline and believes that the return on investment is considerably higher than high risk transformational deals, particularly in the dynamic immuno-oncology space, the analyst pointed out. Baum also noted that he anticipates Pfizer to meaningfully increase its current share repurchase program from the current $5B-$6B per annum to offset the earnings per share dilution from higher anticipated research and development investment to monetize its current pipeline. Regarding AstraZeneca (AZN), Pfizer’s CEO told the analyst that revisiting it as an M&A target was “impossible” given the political sensitivities likely compounded by Brexit. The analyst reiterated a Sell rating on Pfizer shares and said he continues to prefer shares of Bristol-Myers, Merck (MRK) and Eli Lilly (LLY).

BRISTOL-MYERS TARGET LOWERED: In a separate research note, Citi’s Baum lowered his price target for Bristol-Myers to $70 from $78 as Pfizer backs away from a potential takeover. The analyst’s previous price target reflected a 65% probability of acquisition, most likely by Pfizer at $83, he noted. Nonetheless, Baum told investors that he views his newly-lowered target price as conservative given the absence of contribution from CHECKMATE-9LA in first line non-small cell lung cancer, which has the potential to define a new standard of care regardless of baseline PDL1 and TMB tumor status. The analyst reiterated a Buy rating on Bristol-Myers shares.