LONDON (Reuters) - Pfizer defended the business case behind its plan to acquire AstraZeneca on Monday and questioned the UK drugmaker’s ability to stand alone for much longer as the New York-based group’s CEO prepared for a grilling from British lawmakers.
Aiming to douse questions about its commitments to British jobs, Pfizer also said its agreement to complete AstraZeneca’s new research centrer in Cambridge, retain a factory in northwest England and put a fifth of its research staff in Britain if the deal goes ahead were legally binding.
The comments are Pfizer’s latest counter to critics of its proposed $106 billion deal, which would be the largest foreign takeover of a British firm and is opposed by many scientists and politicians - as well as AstraZeneca itself.
With its bid now the subject of heated debate in Britain’s Houses of Parliament and across the country’s news channels, the U.S. drugmaker took a harder line on Monday, saying the merger would create “a UK-based scientific powerhouse”.
It also took a swipe at AstraZeneca’s go-it-alone strategy by arguing that Britain’s second biggest pharmaceuticals business lacked the financial muscle to make the most of its experimental medicines.
“Looming patent expiries and near term revenue losses jeopardize its ability to deliver on its very promising pipeline,” Pfizer said in a written submission to a parliamentary committee.
Pfizer’s Scottish-born Chief Executive Ian Read faces tough questions from British lawmakers on Tuesday about his plans to acquire AstraZeneca - a deal driven in large part by Pfizer’s wish to cut its tax bill.
Lawmakers will also interrogate AstraZeneca’s French CEO Pascal Soriot and business minister Vince Cable on Tuesday. 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.
In response to worries about safeguarding the British company’s research, Pfizer’s R&D head Mikael Dolsten posted a video on Pfizer’s website saying he had been through five different mergers which did not disrupt drug research.
“If you keep your sense of curiosity and an open mind, you can learn tremendously,” he said.
“We must stay laser-focused on our important projects. And that‘s, of course, true for Pfizer scientists and AZ scientists and will be true also if we can make a potential combination come together.”
Dolsten said there was “a really great fit” with the products that AstraZeneca had in its portfolio, with potential for combining drugs in areas such as lung cancer to offer much more effective treatments.
There is considerable skepticism about Pfizer’s long-term commitment to British jobs, given its record of cost cutting after past acquisitions and after it said it could adjust those promises if circumstances change “significantly.”
But Pfizer said the fact it had made the promises as part of its offer made them legally binding and the pledges should be given “full weight”.
Prime Minister David Cameron said on Sunday he had made “very good progress” in securing guarantees from Pfizer, though the firm’s latest statements contained no new offers.
Pfizer is widely expected to come back with a sweetened offer for AstraZeneca this week, though people familiar with the matter said it was likely to wait until after the parliamentary select committee hearings.
The British group rejected a May 2 cash-and-stock offer worth 50 pounds a share from its larger American rival, and CEO Soriot has been on a roadshow to meet leading investors and lay out his strategy for a prosperous independent future.
Soriot has secured the backing of several high-profile shareholders, but others have told Reuters they would like him to engage with Pfizer if the U.S. group makes an improved offer.
In addition to wanting a higher price - many analysts think Pfizer will have to offer around 55 pounds a share - investors are also keen to increase the proportion of cash in any deal from 32 percent at present.
Pfizer is limited in the amount of cash it can offer since in order to keep the tax advantages of re-domiciling to Britain it must ensure at least 20 percent of the enlarged group is British-owned.
Under British takeover rules, Pfizer has until May 26 to make a firm bid for AstraZeneca or walk away.
A slide in Pfizer’s share price following its first-quarter results last week has reduced the current value of its May 2 offer to just under 48 pounds. AstraZeneca shares traded 0.3 percent higher at 46.15 pounds by 1115 GMT.
Pfizer has a tarnished reputation in Britain after shutting down most of its drug research in Sandwich, southern England, where Viagra was invented, with the loss of some 1,700 jobs.
Editing by Sophie Walker