Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

When the Treasury Department steps on the biggest drug merger of all time, all that cash and momentum has to go somewhere. 

Pfizer's first post-Allergan deal -- a $5.2 billion purchase of Palo Alto-based Anacor Pharmaceuticals announced Monday morning -- doesn't quite reach a $160 billion mega-inversion level of ambition. But it is the first step in the firm's next stage. The deal isn't transformative, but it bolsters a near-market pipeline ahead of a possible split of its new drugs from its established products. This may be the first course of an extended M&A feast to help accomplish that shift.

No Inversion, No Problem
Pfizer's shares are up since its proposed mega-deal with Allergan fell apart in early April.
Source: Bloomberg

Anacor has a toenail fungus drug on the market and a pipeline that includes an antibiotic and other anti-inflammatory drugs. But the real prize is its experimental eczema treatment, crisaborole. The drug has successfully completed Phase 3 studies and is set to get an up-or-down vote from the FDA by January 7 of next year. In its press release, Pfizer said it expects peak annual sales of crisaborole could reach or exceed $2 billion. 

Pfizer already has a set of drugs that could help it grow revenue this year for the first time since 2010. Analysts expect combined sales of three of the company's fastest-growing treatments, Eliquis, Prevnar and Ibrance, to exceed $15 billion in 2020.

But its near-term pipeline is less exciting. Pfizer is in late-stage testing of a drug to treat high cholesterol -- a market that already has established competition from Amgen and Sanofi/Regeneron. Its late-stage diabetes drug faces three major competitors.

Getting Anacor's eczema drug on the market early next year would boost Pfizer's growth prospects. A primary rationale for breaking Pfizer up is to unchain its innovative drugs from its lower-margin, lower-growth, established-products business. The company's last major acquisition -- a $16.8 billion deal for Hospira last year -- was seen as bulking up the established business so it could survive better on its own. The Anacor deal may point to a similar growth-boosting strategy for the other side of the business. 

The announced price is a 55 percent premium to Anacor's Friday stock price. But at $99.25 a share, Pfizer seems to be taking advantage of a weak biotech market; before the deal announcement, Anacor shares were down 58 percent from a peak above $150 last summer. It's smart timing in another way: Allergan had been seen as a possible bidder for Anacor, but won't get cash from selling its generics business to Teva until at least June. 

Value Leak
Anacor's shares spiked last year on good data for its lead drug candidate, but those gains dribbled away as the biotech market has plunged since then.
Source: Bloomberg

And $5.2 billion is a drop in the bucket for a company that was ready to spend far more on Allergan. Pfizer had $19.4 billion in cash and equivalents on hand as of its most recent filing. Pfizer generates enough cash that it could make plenty of deals this size or larger without really breaking a sweat.  

Flowing On
Pfizer generates plenty of cash, and is expected to produce even more going forward. If it has the appetite for more deals, it will have the financial firepower.
Source: Bloomberg

Pfizer has said it will decide on a breakup by the end of this year. The Anacor deal may be a multi-billion-dollar hint as to which way the company is leaning. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Max Nisen in New York at

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Mark Gongloff at