The boss of U.S. drugmaker Pfizer faces UK lawmakers on Tuesday with a promise and a threat – to protect British jobs in his proposed joint creation with AstraZeneca of a global powerhouse upon which he says the latter’s future depends.
Ian Read faces hostile questions in parliament over his proposed $106 billion play for AstraZeneca. He goes into committee hearings having pledged to keep a fifth of research jobs in Britain, and warned the country’s second biggest drugmaker could wither without Pfizer’s financial muscle.
Pfizer’s bid would be the largest foreign takeover of a British firm and is opposed by many scientists and politicians, as well as AstraZeneca itself.
The British company rushed out further details on its new drug pipeline early on Tuesday morning, highlighting positive late-stage trial results with a diabetes drug combination called saxagliptin/dapagliflozin. It also flagged good news on four drugs for asthma, rheumatoid arthritis and lupus on Monday – aiming to prove it can stand on its own.
In response Pfizer also issued an early morning statement saying again that it believed AstraZeneca’s standalone business faced challenges, and added that it was “disappointed at the lack of engagement by the AstraZeneca board.”
Pfizer said its offer was based solely on public information and that engagement with the AstraZeneca board could help deliver “optimal deal terms” which the British firm could recommend to its shareholders.
“Engagement would provide AstraZeneca management with the opportunity to provide Pfizer a better understanding of the business and its prospects, and the credible basis for their new long-range targets,” it said. “Pfizer will continue to be disciplined on price.”
AstraZeneca rejected Pfizer’s May 2 cash-and-stock offer worth 50 pounds a share, arguing that the approach undervalued it “significantly” and it had a bright future as an independent business.
The U.S. group is widely expected to come back with a sweetened offer for AstraZeneca this week, although people with knowledge of the matter said it was likely to wait until after the parliamentary hearings.
Parliamentary select committees cannot block corporate transactions but they can question executives ferociously, as banks, energy companies and Rupert Murdoch’s New Corp have all found out to their cost: The media coverage resulting from these firms’ sessions with lawmakers confirmed them as corporate bad guys for many members of the public and placed their future dealings under even closer scrutiny.
Adrian Bailey, chairman of the Business Innovation and Skills Committee that will be questioning Read, suggested on Tuesday morning that he and his colleagues would be looking to pin Pfizer down further on its jobs promises.
“We want to try and extend those assurances to give confidence both to the employees and to the scientific community in this country,” he said in a BBC radio interview.
Pfizer already has a tarnished reputation in Britain after shutting down most of its research in southern England where Viagra was invented, with the loss of some 1,700 jobs.
Now it faces skepticism about its long-term commitment to AstraZeneca, particularly after it said it could adjust promises if circumstances changed “significantly.”
“What we’ve seen in previous Pfizer takeovers is a reduction in investment, job cuts and, frankly, asset-stripping. That’s the big concern. There’s nothing that we’ve seen that guarantees the same wouldn’t happen here,” said Willie Bain, a Labour member of the Business Innovation and Skills Committee.
Unite, Britain’s biggest trade union, ran an advertisement in the country’s biggest free morning newspaper Metro on Tuesday, saying Pfizer was “the wrong prescription for Britain.”
Read is also likely to come under fire over the ethics of re-domiciling in Britain, for tax purposes only, in order to cut its tax bill – a move that has sparked anger as well in the United States, where the taxman stands to lose out.
Pfizer admits the proposed deal will involve job losses and result in it paying less tax but argues such things are necessary to improve efficiency in an industry where governments are pressuring drug companies to cut costs.
In Tuesday’s sessions lawmakers will also interrogate AstraZeneca’s French CEO Pascal Soriot and business minister Vince Cable.
Then a second parliamentary committee on May 14 will question both CEOs again, along with British science minister David Willetts, about the science aspects of the deal.
“They can make enough noise to cause embarrassment and bring a real spotlight onto this whole deal, which could be pretty uncomfortable for Pfizer,” said Navid Malik, head of life sciences research at Cenkos Securities.