AstraZeneca Makes Case Against the Friendly Pfizer’s Bid
Reporter: Aviva Lev-Ari, PhD, RN
US drug giant Pfizer has said commitments to preserve UK science jobs – if it wins a $106bn (£63bn) takeover of AstraZeneca – are legally binding.
Pfizer has given a five-year promise to complete an AstraZeneca research centre in Cambridge, keep a factory in Macclesfield, Cheshire, and place a fifth of research staff in the UK.
The pledge comes ahead of a Commons committee appearance by Pfizer bosses.
Pfizer said its promises were binding “as a matter of English law”.
But it also said it could adjust the promises if circumstances changed “significantly”.
Our business editor reports that the government is hoping the regulator that oversees takeovers, the Takeover Panel, will be able to ensure Pfizer’s promises are met.
Science worriesPfizer’s chief executive Ian Read faces questions from UK politicians on the Commons business select committee on Tuesday about the proposed takeover.
The committee will also quiz AstraZeneca’s French boss Pascal Soriot and business minister Vince Cable on Tuesday.
“Start Quote
By making it part of the offer document, the government believes that “legally binding” does have some force. It was the Takeover Panel that censured Kraft for its failure to honour commitments to the Somerdale factory it made during its purchase of Cadbury.”
The executive pair, and science minister David Willetts, will then appear before the Commons science select committee a day later
If Pfizer is successful, it would be the largest foreign takeover of a UK firm.
As well as by AstraZeneca itself, the takeover is opposed by many scientists, politicians and trade unions.
Four British scientific bodies – the Society of Biology, Biochemical Society, British Pharmacological Society and Royal Society of Chemistry – have warned that recent mergers and acquisitions have led to lab closures, threatening the research base.
‘Powerhouse’Meanwhile, the GMB and Unite unions have asked Business Secretary Vince Cable to “use the powers we believe he has to stop the acquisition of AstraZeneca”.
Pfizer has claimed the merger would create “a UK-based scientific powerhouse”. The firm – which makes drugs including Viagra – has a global workforce of more than 70,000, with 2,500 in the UK.
AstraZeneca has eight sites in the UK and about 6,700 employees, with a global workforce of 51,000.
Its board has said the offer – the second Pfizer has made – was too low, and that it believed a major driver for the takeover was the move to establish a tax residence in the UK by changing its company structure.
UPDATED on 5/13/2014
Pfizer’s Possible Offer for AstraZeneca plc (“AstraZeneca”) Represents Compelling Shareholder Value
13 MAY 2014
This is an announcement of a possible offer falling under Rule 2.4 of the City Code on Takeovers and Mergers (the “Code”). It does not represent a firm intention to make an offer under Rule 2.7 of the Code. Accordingly, there can be no certainty that any offer will ultimately be made.
Rationale for a combination is compelling—strategic, financial and operational benefits
Presents significant value creation opportunity for AstraZeneca shareholders
- Substantial premium and significant cash component
- Pfizer committed to developing and maintaining world class R&D capabilities
- Pfizer confident on deliverability of transaction
- Pfizer is keen to engage with the AstraZeneca Board
- Pfizer today is publishing a presentation to the shareholders of AstraZeneca on the merits of a combination of the two companies.
As indicated in its announcements on 28 April and 2 May 2014, Pfizer wishes to enter into discussions with AstraZeneca regarding a potential combination of the two companies and remains disappointed at the lack of engagement by the AstraZeneca Board. As laid out below, Pfizer believes there is compelling rationale for a combination and if AstraZeneca engages in conversations to provide Pfizer with a better understanding of its business and its prospects it may lead to a transaction that AstraZeneca can recommend. Pfizer continues to believe that engagement by the AstraZeneca Board is in the best interest of all stakeholders of both companies.
Compelling strategic rationale for a Pfizer/AstraZeneca combination:
Clinical, regulatory and reimbursement risks continue to increase the cost of drug development and the risk profile of the industry. Pfizer believes a combination of Pfizer and AstraZeneca would create an industry leader with the scale, operational efficiency, financial strength and breadth of portfolio to better address these challenges.
Pfizer believes there is strong strategic, operational and financial rationale for a combination:
- Strong strategic fit:
Combination would enhance the innovative and established portfolios of both businesses; provide even more desirable product portfolio to enhance commercial position in key emerging markets and enhanced optionality to pursue future separation, though no decisions have been made.
- Strong operational fit:
Combination expected to enhance global offerings for innovative business; strong combined R&D organisation and pipeline would support innovative growth; established business well-positioned to optimise portfolio lifecycles.
- Strong financial fit:
Combination expected to create strong and consistent pro forma cash flow enabling continued investment in innovation and shareholder return; significant expected operational and financial synergies; efficient tax structure for combined operations and capital allocation; expected to be accretive to adjusted diluted EPS1 in first full year and to accelerate adjusted diluted EPS growth thereafter2; ongoing value creation from anticipated operational and financial synergies.
AstraZeneca’s standalone business faces challenges:
- Predictability of revenue loss – major products with total 2013A sales of circa $14 billion3 facing near-term patent expiration.
- Uncertainty of revenue potential – attractive but high-risk early stage pipeline that still requires significant investment.
- Competitive commercial dynamics require significant investments while topline pressured by major loss of exclusivity (“LOE”).
- Major LOEs will pressure margins and ability to return capital to shareholders.
- Late-stage pipeline less differentiated than early-stage pipeline.
- Potential lack of sufficient scale to compete against large national players in emerging markets.
- Pfizer’s business model with distinct innovative and established pharmaceutical businesses provides an opportunity to optimise AstraZeneca’s complementary portfolios.
- Combined business expected to have the financial strength and stable pro forma cash flow essential to support continued investment in science and innovation while driving shareholder value.
Pfizer is committed to world class R&D capabilities:
Pfizer has a strong track record of integrating science and business to deliver value to patients, the health care system and shareholders.
Pfizer’s key R&D priorities include:
- Delivering high-value medicines and vaccines – six therapeutic areas (Immunology & Inflammation, CV & Metabolic Diseases, Oncology, Vaccines, Neuroscience & Pain, Rare Diseases) plus biosimilars, with 80 projects in clinical development and 13 approvals over the last four years.
- Advancing leading capabilities across multiple therapeutic modalities.
- Collaborating to shape the health innovation environment.
- Pfizer is reiterating its commitment to having at least 20% of the combined company’s total R&D workforce in the United Kingdom going forward and creating a substantial innovation hub in Cambridge and the wider scientific community.
Pfizer’s 2 May 2014 proposal offers AstraZeneca shareholders a significant and immediate value creation opportunity4:
Substantial premium to both AstraZeneca’s unaffected share price and analyst price targets.
Pfizer’s 2 May 2014 proposal represents a 37% premium to the mean analyst price target as of 17 April 2014 of £36.565.
The proposal also represents a 32% premium to AstraZeneca’s closing share price of £37.82 on 17 April 2014 (the latest trading date preceding speculation of an offer by Pfizer for AstraZeneca).
Significant cash component.
Expected to be accretive to adjusted diluted EPS6 in first full year7 and ongoing value creation from anticipated operational and financial synergies:
Expected strong and consistent pro forma cash flow enabling continued investment in innovation and shareholder return.
Significant anticipated operational and financial synergies.
Efficient tax structure for combined operations and capital allocation.
Pfizer is confident the transaction is deliverable:
Pfizer has assessed this transaction in detail and is confident it can be implemented.
Transaction to be structured in a way that meets all applicable legal and tax jurisdiction requirements.
Pfizer would not be embarking on a possible offer, incurring significant cost, without a high degree of confidence on deliverability.
Pfizer continues to want to engage with AstraZeneca:
AstraZeneca can work with Pfizer to help deliver optimal deal terms and structure.
The possible offer put forward by Pfizer on 2 May 2014 was based solely on public information. 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.
Constructive engagement may lead to a transaction that AstraZeneca can recommend. Pfizer will continue to be disciplined on price.
The full presentation to AstraZeneca investors can be found at www.pfizerupdate.com.
Pfizer’s Possible Offer for AstraZeneca plc (“AstraZeneca”) Represents Compelling Shareholder Value – FiercePharma http://www.fiercepharma.com/press-releases/pfizers-possible-offer-astrazeneca-plc-astrazeneca-represents-compelling-sh#ixzz31cMnATgh
UPDATED on 5/6/2014
AstraZeneca Makes Case Against Pfizer’s Bid
Luke Macgregor/ReutersAstraZeneca is a British drug maker.Updated, 4:39 p.m. |
AstraZeneca on Tuesday made an impassioned defense for itself as a stand-alone company, just a day after the American pharmaceutical giant Pfizer again pressed its case for a $106 billion takeover of the British drug maker.
Whether a Pfizer bid will run into political opposition in Britain is unclear as lawmakers debated what role the British government should play in the attempted takeover of one of the country’s most successful companies.
But with AstraZeneca thrust into in Pfizer’s crosshairs at a vulnerable moment, its chief executive, Pascal Soriot, is being forced to sell investors on an optimistic long-term vision of the company.
In his most robust public response to the approach by Pfizer yet, Mr. Soriot called his company’s pipeline of drugs in development one of the best in the industry and said the talent it had acquired and the restructuring it has undergone in the past 18 months made a strong case for remaining on its own.
In presenting new long-term financial estimates on Tuesday, AstraZeneca said that it expected to achieve annual revenue of $45 billion by 2023 as an independent company – an 84 percent increase from the $25.7 billion posted in 2013 — suggesting that Pfizer’s bid undervalues the company’s potential growth.
“We remain confident in our ability to execute our independent strategy and to deliver significant value for our patients and shareholders,” Mr. Soriot said.
AstraZeneca estimated the potential value of drugs that are still in development, including promising immunotherapies to treat cancer, forecasting that the new drugs would generate peak annual sales of at least $23 billion.
But some analysts balked at the firm’s rosy projections. In a note to clients, Mark Clark from Deutsche Bank said investors will likely see the projections as blue sky.
“AstraZeneca can genuinely boast a potentially exciting pipeline but promise and sales do not necessarily match up in this risky and competitive industry and furthermore its ex-pipeline assumptions will likely be seen as optimistic,” he said.
With AstraZeneca’s future prospects murky, investors and analysts believe a deal is in its best interest, though many expect Pfizer will increase its offer in order to get the deal done on friendly terms.
And aside from any bump in the offer price, Pfizer will likely have to make more specific and binding commitments to protect British jobs and investment to win over political support.
Two committees of lawmakers – one responsible for business and another for science and technology – have asked executives from both Pfizer and AstraZeneca to attend hearings.
Speaking in Parliament Britain’s business secretary, Vince Cable, a Liberal Democrat, said Tuesday that he “would certainly rule out intervention on protectionist grounds but I am not ruling out intervention. We need to look at all the options available to us.”
Mr. Cable said that he was “open-minded” about using public interest powers to intervene though he said that this might be constrained by European Union legislation.
He added that Pfizer had given assurances to the government but that, were the merger to go proceed, “there will be negotiations to make sure that any obligation is binding.”
The government of Prime Minister David Cameron, which has held discussions with Pfizer about the company’s plans for AstraZeneca, has sought assurances for job creation and investment in research.
The opposition leader, Ed Miliband, has accused Mr. Cameron of acting like a “cheerleader” for Pfizer. There are also reservations within Mr. Cameron’s Conservative Party and, on Tuesday, the Mayor of London, Boris Johnson, said that the government should seek more assurances from Pfizer.
“When I look at something like AstraZeneca, and I look at an organization of that scale, of its relative importance to the U.K. economy, the sheer percentage of its money that goes into research and development I think it is of great importance to Britain so I don’t think politicians can be entirely aloof from this,” Mr. Johnson told LBC Radio.
“I’m not taking a position against the deal necessarily, but it would be very important to establish that Pfizer is genuinely committed to R.&D. in this country.”
Meanwhile, Sir David Barnes, a former chief executive of AstraZeneca, told the BBC that he feared Pfizer would act like a “praying mantis” and “suck the lifeblood” out of AstraZeneca.
Speaking after a meeting of European finance ministers in Brussels, the Chancellor of the Exchequer, George Osborne, said that the government’s “sole interest here is in securing good jobs in Britain, good manufacturing jobs, good science jobs.
“That’s what I’m interested in and we’ll support any arrangement that delivers that for Britain and we make no apologies for fighting for Britain’s national economic interest,” he added.
AstraZeneca is already experiencing or will soon experience generic competition to three of its biggest products: the antipsychotic Seroquel, the heartburn medicine Nexium and the cholesterol-fighting Crestor. That creates a huge loss of revenue that is hard for new products to fill.
AstraZeneca on Tuesday acknowledged that change would be slow, saying revenue in 2017 would be broadly in line with that of last year.
AstraZeneca also has a spotty record of bringing drugs to market. There is interest in their immuno-oncology drugs, which work by unleashing the body’s immune system to attack tumors; the area is one of the hottest in oncology today.
While the market is potentially quite large — analysts estimate about $30 billion a year eventually — AstraZeneca appears to be behind Merck, Bristol-Myers Squibb and Roche in bringing these to market.
Pfizer, too, is facing a cloudy future. On Monday, Pfizer itselfannounced a drop in revenue and earnings, even as it resumed calls for AstraZeneca to engage in deal talks.
Pfizer, the maker of best-selling drugs like Lipitor and Viagra, has said that the combined power of the two companies together will help them save money. For Pfizer, the deal would allow it toredomicile in Britain, saving at least $1 billion a year in taxes.
But AstraZeneca has so far shown no interest in a deal. It privately rebuffed Pfizer twice, and made public its opposition to a deal over the last week.
On Monday, Ian C. Read, Pfizer’s chief executive, said, “We are very disappointed with their unwillingness to engage in conversations and believe it is in the best interest of both companies and AstraZeneca and Pfizer’s shareholders that we pursue a friendly, negotiated transaction.”
For now, Astra Zeneca is holding fast. Mr. Soriot emphasized on Tuesday that his company was just coming out of its “transformation” and that a merger could be very disruptive.
“A company is not a machine. It is made of people and they have to stay engaged and deliver,” he said, emphasizing that mergers can derail companies.
Pfizer still has the option of taking its case directly to AstraZeneca shareholders before a May 26 deadline. As of that date, British takeover law requires Pfizer to either make a formal bid for AstraZeneca or walk away, unless both companies agree to an extension.
But at this point, it appears investors are expecting something to happen. AstraZeneca’s shares are trading well above where they were before Pfizer announced its interest in what would be one of the largest pharmaceutical deals of all time.
Andrew Pollack contributed reporting.
SOURCE
http://dealbook.nytimes.com/2014/05/06/astrazeneca-makes-case-against-pfizers-bid/?smid=li-share
UPDATED on 5/22014
While the talks between Pfizer, the world’s biggest drugmaker, and $87 billion AstraZeneca have fizzled, an analyst at Citigroup Inc. expects Pfizer to approach the company again, or AstraZeneca could opt to merge with another peer such as Amgen Inc. (AMGN) as a defense tactic. Pfizer’s backup plan could be to acquire Dublin-based Shire Plc, Albert Fried & Co. said.
Both companies face stalling growth over the next few years, with Pfizer needing new products to replace drugs that lost patent protection and AstraZeneca’s promising cancer treatments still years from hitting the market. At the same time, smaller rivals are scooping up assets and building their presence as drug takeovers surged to a five-year high, led by Actavis Plc’s $21 billion bid for Forest Laboratories Inc., according to data compiled by Bloomberg.
Even so, AstraZeneca’s American depositary receipts jumped 8.8 percent yesterday to a 26-year high and Pfizer advanced 2 percent. While AstraZeneca’s ADRs gave back some gains today, the company’s London-listed shares climbed 4.7 percent to 3,960 pence.
Joan Campion, a spokeswoman for Pfizer, and Michele Meixell, a spokeswoman for AstraZeneca, said the companies don’t comment on market speculation, when asked about the deal talks.
Related:
- Novartis to Buy Glaxo Cancer Drugs, Sell Animal Health
- Novartis CEO Still Optimistic’ About ThromboGenics Drug
- Ackman Amassed Allergan Stake Under Botox Maker’s Radar
SOURCE
http://www.bloomberg.com/news/2014-04-22/pfizer-astrazeneca-are-ripe-for-pharma-deal-real-m-a.html
UPDATED on 5/1/2014
Can anything prevent Pfizer’s megamerger with AstraZeneca?
 |
| Pfizer CEO Ian Read |
As Pfizer CEO Ian Read mounted a charm offensive in the U.K. this week, wooing alarmed lawmakers and big shareholders in AstraZeneca in hopes of gathering support for its $100 billion takeover bid, the Financial Times got hold of a couple of AstraZeneca’s biggest investors and found that they were discreetly wide open to a Pfizer takeover–provided the U.S. pharma giant agreed to make an offer they couldn’t refuse.
Given the simple fact that no bidder in any biopharma buyout like this starts with its best price, a sweetened offer is almost certainly built into Pfizer’s ($PFE) strategy, provided no one manages to cool Read’s sudden–and completely unexpected–ardor for AstraZeneca ($AZN). As long as the main issue centers on price and how much cash versus stock is included in the deal, Read’s chances of directing this bid to a successful conclusion are good. Pfizer has tens of billions in offshore accounts to complete this deal. And now Read is committed to making it happen.
“We will see how events pan out over the next few days, but clearly given the scale of the proposed merger it is important that we consider the impact not just on shareholders but also on employees and the wider interests of the UK,” Ann McKechin, a member of the parliamentary business, innovation and skills committee, told Reuters.
In the European scene, though, the U.K. government is known for its hands-off policy toward corporate deals and reorganizations in the pharma world. The country’s unions are toothless. AstraZeneca has experienced no major kickback over its plans to lay off thousands of workers, and the R&D side of the business has seen additional recent cutbacks from Shire ($SHPG) and Novartis ($NVS) go unmolested. Pfizer has had experience in this field as well, first announcing that it planned to close its R&D campus in Sandwich several years ago but eventually deciding to keep about 700 of the 2,000 staffers on the site. That leaves Pfizer with a big stake in the country already and a strong incentive to retain much of AstraZeneca’s R&D organization–with the chance to cut into it again at a later date.
So can the U.S. government block the deal?
Any kind of prospective blocking movement from Congress would likely be months or more away. Even if a divided Congress could agree on closing this particular loophole, Pfizer still has ample opportunity to jump through. The biggest impact that the threat of U.S. government action would have is likely to be on everyone else who might decide to follow a big name like Pfizer and emigrate to the U.K. And some tax specialists say others may rush ahead to follow Pfizer’s example to get their status grandfathered in.
AstraZeneca, though, isn’t necessarily just going to agree to be gobbled up after years of reorganizations, layoffs and new R&D strategies. The management still has plenty to prove, and there’s a distinct chance that the company, in the bottom ranks of the global top 10, can execute a deal that can sour Pfizer’s interest. A $50 billion deal to buy Shire–one of the most frequently touted takeover targets in the industry, which has drawn the interest of Allergan ($AGN)–might do the trick, according to analysts in The City for Societe Generale, reports The Guardian.
Then AstraZeneca could do yet another restructuring.
Pfizer has until May 26 to “put up or shut up” under the country’s M&A rules. There’s no indication that it plans to shut up, but it’s going to be a long month for all involved.
– here’s the report from the Financial Times
– here’s the Reuters story
– here’s the story from The Guardian
– and here’s Bloomberg‘s story
Related Articles:
AbbVie, Amgen and Sanofi could swoop in for AZ, but numbers may not work
Why would Pfizer want to buy AstraZeneca? It’s not R&D
Ignoring harsh lessons, Pfizer pursues $100B deal to buy struggling AstraZeneca
Why pay $100B for AstraZeneca? Let Pfizer’s CEO count the reasons
SOURCE
Can anything prevent Pfizer’s megamerger with AstraZeneca? – FierceBiotech http://www.fiercebiotech.com/story/can-anything-prevent-pfizers-megamerger-astrazeneca/2014-05-01#ixzz30UnCIMv4
UPDATED on 4/28/2014
Updated, 9:06 a.m. | Pfizer publicly announced its interest in acquiring AstraZeneca of Britain on Monday, in what would be one of the biggest in an already swelling series of deal efforts among drug makers.
In a statement, Pfizer said it was willing to pay 58.7 billion pounds, or $98.7 billion. That would make it one of the largest-ever acquisition efforts in the pharmaceutical industry, surpassing Pfizer’s $90 billion takeover of Warner-Lambert 14 years ago.
Pfizer’s prospective bid was valued at £46.61 a share, roughly 30 percent above where AstraZeneca was trading at the beginning of the year.
The move is aimed at putting pressure on AstraZeneca, which has turned down a number of informal takeover approaches from Pfizer.
AstraZeneca shares surged 16.1 percent, to £47.37 in afternoon trading in London on Monday. Shares in Pfizer were up 2.6 percent in premarket trading, at $31.53.
On Monday, AstraZeneca said in a statement that it had agreed to meet in January with Pfizer, which made a preliminary offer of cash and stock representing a value of £46.61 a share – the same amount Pfizer revealed on Monday.
AstraZeneca said its board determined in January that the offer “very significantly undervalued AstraZeneca and its prospects.”
New York Times cites the following link on
STATEMENT FROM PFIZER INC. (“PFIZER”)
POSSIBLE OFFER FOR ASTRAZENECA PLC (“ASTRAZENECA”)
SOURCE
END OF UPDATE
Spurning Merger Approaches, AstraZeneca Pursues Own Path
The British drug company AstraZeneca said no to a tie-up withPfizer, turning down the possibility of one of the biggest drug mergers in recent history.
AstraZeneca hopes to begin late-stage clinical trials this year of at least one drug that works by unleashing the body’s immune system to attack tumors. This is one of the hottest areas in oncology, with doctors predicting a revolution in treatment and securities analysts predicting billions of dollars in sales for successful drugs.
The company is considered to be behind Bristol-Myers Squibb,Merck and Roche in the race to bring such drugs to market. But the market is expected to be big enough for several participants.
SOURCE
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