Pfizer takeover could delay drug development, says Astra chief
- 14 May 2014
- From the section Business
The chief executive of AstraZeneca has warned that new drug development could be hit if it were taken over by Pfizer.
Pascal Soriot told MPs that a takeover would create huge disruption and distraction as scientists worried about their futures rather than development.
However, Business Secretary Vince Cable later told the Business Committee that blocking a bid could be "tricky".
The committee is taking evidence on the proposed takeover amid worries about the damage it could do to UK interests.
Earlier, Pfizer's chief Ian Read told the MPs that his company was not a ruthless cost-cutter, and said the drugmaker acted with "integrity".
He repeated assurances that Pfizer would protect jobs and investment, but admitted that a merger would mean a reduction in the combined companies' spending on research and development.
Even though no formal offer from US-based Pfizer has been tabled, the proposed £63bn-plus takeover has generated huge controversy. The Commons Science Committee will hold its own hearing on Wednesday.
Mr Soriot told the Business Committee that the uncertainty created by a takeover could undermine some of AstraZeneca's work.
"Any distractions on work we are doing now could run the risk of delaying our drugs pipeline," he said. "From the lab to the patient takes many years.
"What will we tell the person whose father died from lung cancer because one of our medicines was delayed because our companies were involved in saving taxes or saving costs?
"It is logical to assume that a merger like this could mean substantial cost savings, and cost savings could mean job losses," he said.
Mr Soriot said the re-domiciling of the newly-merged company to the UK - which Pfizer has said would still see its headquarters remain in New York - would cause "substantial controversy", likely to result in delays.
However, he said that it would be the board of Astra's duty to consider a formal offer from Pfizer, despite rebuffing the US drugmaker's approaches so far.
"It's impossible to say we would never accept any offer," he told a committee. "We are very well aware of our fiduciary duty."
However, despite demands that the government should either block the bid or secure legal guarantees on jobs and investment, Mr Cable told the committee that intervention was "tricky".
The UK has public interest laws governing certain takeovers, such as those involving defence and media interests, but not for science.
Mr Cable said: "The framework which we have under the act, as you know, confines the public interest test quite narrowly and, of course, all of that takes place within the framework of European merger law."
The business secretary refused to be drawn on the precise legal and financial mechanisms that could make Pfizer's assurances binding. He said he would "rather not expose" the government's thinking on that "in too much detail".
But he accepted that the government faced a "dilemma" between being open to the benefits of foreign investment and protecting wider national interests.
In response, Labour's shadow business secretary, Chuka Umunna, said he was still to be convinced that an acquisition would be good for the UK.
"I think what we heard at the hearing today reinforces the grave concerns we have about this deal and confirms many of the worst fears of many in the business and science community in the UK," he said.
"What do we know? [Pfizer] confirmed that they will be cutting jobs, they've confirmed that there will be a cut in the spending of the combined merged entity, they've confirmed that the business, AstraZeneca, will be split up, and they haven't ruled out selling off parts of it in the future."
And he pointed to AstraZeneca's assertion that the distraction of any deal could potentially inhibit the production of life-saving drugs.
But business body the Institute of Directors, said "we should be alive to the consequences of mounting a British Inquisition for those who wish to do business in what is supposed to be an open economy".
"If our politicians really want to whip up a storm around this issue, they'd be better off scrutinising the role of institutional investors in the whole process," added the body's director general Simon Walker.
"In particular, the asset managers and asset owners that control so many of AstraZeneca's shares."
Earlier, Mr Read mounted a strong defence of Pfizer's record, rejecting complaints that it had a poor track record on maintaining jobs and investments, both in the UK and elsewhere.
Adrian Bailey, chairman of the Business Committee, asked Mr Read to respond to claims that Pfizer was like a "praying mantis" and a "shark that needs feeding".
Mr Read said he was "very proud" of his 35 years at the firm, describing it as a "company of high integrity focused on patients and delivering drugs to patients".
He said he was not concerned about an attack on the company by Swedish Prime Minister Fredrik Reinfeldt, who referred to "negative experiences" after Pfizer took over Pharmacia.
Mr Read said the comments were based on a "misunderstanding of the facts" over strategy and a promise to build a factory only if a product got regulatory approval. "Having set the facts right, I'm not concerned" by the comments, he said.
He added that a merged Pfizer-Astra would mean research expenditure would be lower than that of the two separate companies. This, he said, was because one of the drivers of the proposed deal was to increase efficiency in order to keep both firms competitive in an increasingly tough marketplace.
"Our commitment is to base 20% of our global research and development in the UK," he said. But without more due diligence on AstraZeneca's books "I can't tell you today how many people we are going to have in R&D," he added.
But the final jobs number would be "substantial", Mr Read promised. "I have not seen AstraZeneca's books. Some things are sight-unseen. But the numbers will be substantial... We are a highly ethical company. Pfizer is a company that keeps its promises."
Committee member Mike Crockart asked why the UK Government should support a Pfizer bid, when "you have a reputation of being ruthless cost-cutters, and that seems to be borne out by what you have said today".
Mr Read replied that the takeover was "an opportunity to domicile the largest pharmaceutical company in the world, to bring the strength of the combined portfolios and to bring our financial strength into the UK and globally.
"I think it will strengthen the scientific base in the UK, a company our size making these sorts of commitments."
'Not long enough'
Before the committee hearing, the President of the Royal Society, Prof Sir Paul Nurse, told the BBC that Pfizer's five-year commitment to maintain research and jobs was "vague" and insufficient.
Sir Paul, who has submitted written evidence to the committee, said: "Research is a long-term business. I have researched for 40 years of my life. I know that five years is not long enough term to be committed to.
"They need to look at a 10-year horizon at least if they are actually going to make an important impact on this area and produce the medicines that will help people."
On Tuesday, Pfizer turned up the pressure on AstraZeneca by outlining its takeover proposals to Astra's shareholders.
Pfizer laid out the "strong strategic rationale" of the £63bn takeover plan.
Astra responded by calling Pfizer's takeover plan an "opportunistic attempt" to buy the company for a price that did not reflect the value of its "exciting pipeline" of new drugs.
Any deal would be the largest foreign takeover of a UK firm to date, but the proposal has revived memories of when US food giant Kraft abandoned jobs pledges after it bought Cadbury.