Astra deal is good for UK, Pfizer tells MPs

Pharma giant is expected to make renewed bid for UK rival

US drugs giant Pfizer stepped up the battle for Astra Zeneca by trying to dismantle the defence put forward by its British rival.

Pfizer is expected to make a third approach for Astra later this week, after its last offer of £63bn was rebuffed.

But the controversial takeover has received widespread criticism and Pfizer faces mounting opposition to the deal.

Yesterday, in an effort to convince Astra investors they must sell the company or risk financial hardships, the US firm went on the attack.

In a letter to politicians, ahead of today’s grilling by a committee of MPs, Pfizer said Britain’s second biggest pharmaceuticals firm ‘faces difficult challenges’.

Pfizer warned: ‘Looming patent expiries and near-term revenue losses jeopardise its ability to deliver on its very promising pipeline.

‘Astra Zeneca’s ability to deliver its pipeline will require very substantial investments during a time when the company’s revenues will be declining sharply as a result of the loss of patent exclusivity on important products.

‘A combined Pfizer-AstraZeneca would provide a financial engine that could support robust, yet thoughtful, R&D investment across the portfolio.

‘A combined company would be stronger financially, enhancing our ability to invest in the best science - wherever we find it.’

But analysts reckon AstraZeneca, which employs 6,700 staff in the UK and accounts for around 2.3pc of Britain’s exports, could yet survive as a separate entity.

Astra has also insisted the company’s own drugs pipeline, which includes medication for fighting cancer and diabetes, is strong.

In Astra’s most recent stock market update last month, the group said four new drugs – two for tumours and two for breathing difficulties – were in advanced stages of development.

Following the update, Panmure Gordon analyst Savvas Neophytou said: ‘There is enough for investors not to be entirely happy with, which is why we expect a bid upwards of £55 will be required to get AstraZeneca to the negotiating table.’

Pfizer’s previously rejected offer was for £50 per share. Astra shares yesterday climbed 9.5p to 4610p.

But the offer was also heavily comprised of Pfizer’s own shares – which means the value has slipped as the US company’s own shares fell.

If Pfizer returns with a higher bid – expected to be on Thursday or Friday – this is likely to include a far higher proportion of cash.

Pfizer also wants to complete the deal because of the tax advantages the company could gain from moving its global base out of the US.

Yesterday Pfizer said this would ‘make the combined business more competitive with other non-US pharmaceutical companies’.

But the company has already been criticised over its tax affairs, which include having 40pc of subsidiaries based in offshore havens.

Pfizer has almost 200 offshoots based in low tax jurisdictions, and has built up some £43bn globally in these shelters. Critics have said moving base to the UK will not result in higher payments in Britain, but will merely enable Pfizer to push more into tax havens.

The document given to MPs also included a series of pledges from Pfizer such as ensuring ‘key scientific leadership’ was based in the UK, and a pledge to ‘retain substantial commercial manufacturing facilities’.

Pfizer promised the resulting com- pany, if completed, would become a ‘UK scientific powerhouse that will deliver value to patients, shareholders and the UK’.

But critics pointed out that previous deals have led to large numbers of jobs cuts.

Four leading British scientific bodies – the Society of Biology, Biochemical Society, British Pharmacological Society and Royal Society of Chemistry – warned that recent mergers and acquisitions have also led to lab closures.