This week, Pfizer confirmed rumors that preliminary, non-binding discussions with AstraZeneca took place in January 2014 regarding a possible merger. AZ reportedly declined to pursue negotiations. Pfizer again contacted AstraZeneca on April 26th with a second proposal of approxily $98.7 billion, seeking to renew discussions. AstraZeneca again declined to engage, raising the possibility of a hostile takeover in the future.
According to Pfizer, the proposed transaction would result in the combination of the two companies under a new UK-incorporated holding company. As a global corporation, Pfizer would expect the combined company to have management in both the U.S and the UK, and to maintain head offices in New York and list its shares on the New York Stock Exchange.
As reported by Bloomberg, the transaction would allow Pfizer to use $70 billion of cash it has accumulated overseas that would be subject to taxes if brought back to the U.S. and, because the combined company would be based in the UK, would lead to a lower tax rate. AstraZeneca would bring a portfolio of cancer medicines, including early-stage immuno-oncology treatments, cardiovascular medicines, and diabetes medicines.
Pharma bloggers and commentators were critical of the move, the motivation behind it, and its likely impact on the industry. As Tracy Staton wrote on FiercePharma.com, the buyout would likely lead to heavy job loss. Pfizer's buyout of Wyeth resulted in the loss of 51,500 jobs over the following seven years, she wrote.
Drug discovery specialist, blogger and CP columnist Derek Lowe wrote on his blog, In the Pipeline, that the deal, if it goes through as a hostile takeover, would "take place at the highest price and in the messiest fashion that it possibly could. And for what?"
He also points out the fact that Pfizer closed its own major R&D site in Sandwich, U.K. "What would Pfizer do with AZ if they got them. Take the drug pipeline, close down everything in the U.K. again, and just leave a corporate structure intact for the tax break?"
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Published April 30, 2014
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