The transatlantic stand-off between the two pharmaceutical giants, Pfizer and AstraZeneca, is over; possibly for good. With Pfizer having failed to conclude a £69bn deal with the British-Swedish multinational pharmaceutical firm, almost £7bn was wiped from AstraZeneca’s share value.
AstraZeneca’s board, which decided that Pfizer’s bid was inadequate, has subsequently been criticised by major shareholders for “failing to engage”. Pfizer meanwhile, has been accused of being driven purely by the lure of lower taxes, job cuts and budget reductions. We have rounded up the reasons why we think that Astra Zeneca were right to reject the takeover bid from Pfizer.
The proposed takeover had major implications for several sectors. From major health and pharmaceutical recruiters to manufacturers and research companies, all would have been affected by Pfizer’s huge takeover bid. Despite repeated initial assurances from Pfizer’s CEO, Ian Read, both AstraZeneca and Pfizer finally acknowledged in last week’s parliamentary select committee meeting that there would be cuts to both jobs and research.
Indeed, even before the failure of the bid, many academics, scientists and even union leaders were accusing Pfizer of being driven purely by the possibilities of a lower taxes and reductions to the research budget. Pfizer had already been described by a former boss of AstraZeneca as a “praying mantis” ready to “suck the lifeblood out of their prey”.
However, AstraZeneca’s current chairman, Leif Johansson said that the deal represented “a significant risk to shareholders.”
Threats to R & D
The potential threat to research, had the deal succeeded, was very real; particularly as much of today’s R & D is outsourced in order to avoid high capital and staff costs within parent companies. In what is already a highly fragmented industry, it is only organisations such as ICON that have the necessary expertise and experience to conduct clinical trials and development. Both AstraZeneca and Pfizer acknowledged that a merging of the two companies would have resulted in less research and development being carried out as a result of budget cuts.
Therefore, had the takeover succeeded, the significant benefits of AstraZeneca and Pfizer engaging in independent research programmes would have been lost. The result would have been an inevitable reduction in pharmaceutical discovery and its subsequent development.
Conflict of Interest
It is believed that one of the motives behind the takeover bid was Pfizer’s interest in evading tax, with the opportunity to pay the UK corporate tax rate of 20%, rather than the 35% rate applied in the US, if it bought AstraZeneca. This caused AstraZeneca chairman Leif Johansson to state that Pfizer’s pursuit had been “fundamentally driven” by the corporate financial benefits.
There is still a slim possibility that AstraZeneca and Pfizer might return to the negotiating table in the future. Under the rules laid down by City regulators, AstraZeneca shareholders could overrule the board’s rejection of the Pfizer’s final offer. Most city analysts, however, believe the possibility of a deal is now dead.
However, it could be said that after all the drama, there are still some winners; pharmaceutical and health providers, those who will not now lose their jobs and, in the end, the rest of us, all benefit from the diverse and beneficial research by two of the world’s largest pharmaceutical companies being allowed to continue. For the moment anyway.