13th May 2014 14:30
LONDON (Alliance News) - UK pharmaceutical giant AstraZeneca PLC rejected Pfizer Inc's GBP63 billion approach again on Tuesday, calling it "opportunistic", but the company left the door open for an improved approach from its US rival.
As UK politicians grilled executives of both companies about the potential deal and what it will mean for the UK's pharmaceutical industry, AstraZeneca Chief Executive Pascal Soriot said
"it's impossible to say we would not accept any offer".
Pfizer is planning to sweeten its approach to AstraZeneca for a second time, raising it modestly from the current GBP50-a-share approach, Bloomberg reported, citing people with knowledge of the matter. The US company will likely wait until after the UK government hearings, Bloomberg quoted the people as saying.
UK politicians have little say over the outcome of the potential takeover unless they change the law, as the UK is governed by EU takeover laws which leave decisions to company shareholders and anti-trust regulators. The UK has only retained a say over takeovers in some sectors, like defense and the media. However, Pfizer may not proceed with a formal deal if it meets with heavy opposition from the UK government.
In a statement, AstraZeneca said Pfizer was "making an opportunistic attempt to acquire a transformed AstraZeneca, without reflecting the value of its exciting pipeline." That came after Pfizer reiterated its eagerness to continue discussions with the British drugs giant, warning that it faced challenges if it remained independent.
AstraZeneca rejected Pfizer's second takeover approach earlier this month, having previously rejected an initial GBP46.61-a-share approach.
"This [potential] deal does not reflect the new AstraZeneca," Soriot told UK politicians Tuesday. "It reflects the old AstraZeneca."
The company has been hit hard after many of the patents on its best-selling drugs expired, meaning sales fell sharply as generic versions arrived on the market. The company has had to restructure, cut jobs, and, like many peers, focus on a narrower area of treatments as it tries to bolster its costly drugs pipeline.
Pfizer, meanwhile, has been campaigning to UK lawmakers regarding a potential offer, including sending a letter to Prime Minister David Cameron that included commitments to UK investment such as re-domiciling its business in the UK, establishing 20% of the combined companies research and development workforce in the UK, and completing AstraZeneca's R&D centre in Cambridge.
The US company reiterated its commitment to having at least 20% of the combined company's total research and development workforce in the UK, with Chief Executive Ian Read telling UK politicians on the House of Commons' Committee for Business, Innovation and Skills that "I'm a man of my word".
Pfizer said it would keep these commitments for five years, even though it is only required to stick to them for a year under the UK takoever code.
However, AstraZeneca executives were joined by representatives of the GMB and Unite trade unions in expressing scepticism about Pfizer's proposed time period to the politcicians.
A five, or even a ten year time frame would be still too short a term, the National Officer of the GMB union, Allan Black, said. In general, Black said, pharmaceutical companies need to allow around 25 years for the research and development phase to bring a drug to market.
Jane Osbourn, site leader of AstraZeneca's MedImmune arm in Cambridge, added "five years is not enough" to demonstrate much in a merger of this kind, while AstraZeneca's Executive Vice President of Innovative Medicines and Early Development, Mene Pangalos, said that Astra's commitment to the UK already "goes way beyond five years."
Soiret said a merger with Pfizer would be a "distraction" from AstraZeneca's current work, substantially disrupting ongoing projects and leading to delays in drug developments and ultimately hurting patients.
Read admitted that the total percentage level of spend on research and development for the combined company was likely to be lower than it is for the separate companies, although he did not know by how much. However, Read said the focus was not on the percentage level, but on how it was used.
The Pfizer CEO also said the US company could not make any commitments on spending on a country-to-country basis at the moment, as discussions with AstraZeneca have been limited.
Read said that Pfizer would be looking at where "the best place for Science" is, and that the UK was a "great" place for science.
The committee also questioned Pfizer about its commitment to maintaining a "substantial presence" in Macclesfield in Cheshire. Read only reiterated that it was too early to give any specific figures as it had not had any access to AstraZeneca's books.
Soriot, meanwhile, said AstraZeneca remained committed to the 2,000 employees at the site.
The British company expressed concern that Pfizer's potential tax benefits as a result of the merger would attract controversy, and could impact the company's reputation.
Pfizer Chief Financial Officer Frank D'Amelio said it would be "premature" to provide an estimate of the level of tax savings Pfizer would be able to make by re-domiciling in the UK, but said that it was safe to say it would be lower than the 27% rate it is forecasting for this year.
Read said he thought it was a "very remote" possibility that the US congress would be able to alter its tax laws within the timeline of the potential deal with AstraZeneca, even if US lawmakers try and make it less attractive for US companies to re-domicile after a takeover deal.
The GMB and Unite union representatives told the British politicians that their members opposed the proposed takeover of AstraZeneca. Black and Unite Assistant General Secretary Tony Burke said that had not received any contact from Pfizer, which had raised concerns about whether or not Pfizer considered the workers important. The trade unions wrote to both AstraZeneca and Pfizer, and whilst AstraZeneca responded promptly, they said they had not received responses from Pfizer.
Pfizer said it would have been inappropriate to speak with trade unions when there was no deal officially on the table, and it had conducted only limited conversations with AstraZeneca. However, the company said it will speak with the scientific community and trade unions if it were to propose a deal.
AstraZeneca has released a flurry of positive test data this week, on Monday announcing a selection of positive data from mid-stage trials from its biological research and development arm MedImmune's respiratory, inflammation and autoimmune portfolio.
Tuesday, AstraZeneca released positive results from its late-stage study of combination treatment saxagliptin and dapagliflozin for the treatment of type 2 diabetes, which showed that patients treated with the combined drug in addition to metformin, saw a significant reduction in glycated haemoglobin, a key indicator of the control of diabetes.
It also said it would announce Phase IIb data for its asthma treatments benralizumab and tralokinumab at the upcoming American Thoracic Society 2014 International Conference in San Diego on May 16 to 21.
A key part of AstraZeneca's defence against the bid is its growing pipeline of new drugs, which it hopes will return it to growth after 2017. AstraZeneca's current outlook, expecting revenue to return to 2013 levels in 2017, then more than double in the five years after, suggests a bleaker short term performance.
Pfizer has focused on this short term struggle in its argument, saying that AstraZeneca faces challenges as an independent business, noting that the business has an "attractive but high-risk early stage pipeline that still requires significant investment."
Broker Liberum was unconvinced by Pfizer during Tuesday's hearing, saying that executives had "failed to give assurances that the number of British R&D jobs would not fall nor that the Macclesfield plant wouldn?t face significant scale back."
"To us its clear that Pfizer will cut a large number of UK jobs and hence public support for the deal will be lacking," Liberum said.
Discussions over the takeover will continue Wednesday, when both Read and Soriot will give evidence to the House of Commons Science and Technology committee, alongside the Minister for Universities and Science, David Willetts.
Shares in AstraZeneca were trading up 1.9% at 4,696.00 pence, the third highest gainer on the FTSE 100 Tuesday afternoon.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
Copyright 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
Astrazeneca