Pfizer-AstraZeneca: Merger debate continues

HOC science and technology committee chairman Andrew Miller today met with Pfizer chief executive Ian Read, Pfizer worldwide R&D president Mikael Dolsten and head of Pfizer PharmaTherapeutics R&D Rod Mackenzie to continue discussions regarding Pfizer’s potential takeover of AstraZeneca.

The committee met initially with a panel of Pfizer bosses to consider the potential impact a merger between the pharmaceutical companies would have on the scientific community.

Key questions:

Although Miller suggested that a merger would make good financial sense, he began proceedings by scrutinising the commercial sense of such a deal.

“In terms of your research operations, why do you think that Pfizer and AZ (AstraZeneca) would be a good fit?” Miller asked the Pfizer panel.

“At a high level I would say it’s because we have complimentary portfolios,” Read said.

“I think you can see a lot of opportunity for the powerhouse of science coming together

Pfizer R&D president Mikael Dolsten

Addressing the issue in more detail, Dolsten said: “I think you can see, as you get inside the two companies, a lot of opportunity for the powerhouse of science coming together. The companies have complimentary drugs in lung cancer [for example], and if you have portfolio like that [and] can study clinical development, you could have an aspiration to provide much better outcomes for patients. Instead of thinking about weeks and months, combination drugs from the two companies could offer outcomes of many years and even longer.”

“This gives you a flavour of what the companies could be if they came together and shared capabilities,” Dolsten added.

The committee then questioned Pfizer’s desire to secure AZ, asking the panel if it was more a case of controlling its “novel” products, rather than merely replicating those which Pfizer already produces.

“The core message is: ’we are getting stronger but we already were strong’. So where we are focused we are adding complimentary products, complimentary pipeline opportunities and that is what is intriguing for us. It allows us to have signs that have [breadth] and can address multiple issues within a disease,” Dolsten said.

“It’s not diversification; it’s getting stronger where we already are strong.”

Committee members then changed tack, asking the Pfizer bosses how many more sales staff would be required if the merger were successful, and how many less scientists the new combined group would have in order for the “numbers to stack up”.

“You know I can’t give you any definitive figures,” Read said. “We haven’t sat down with AstraZeneca. We’ve done our modelling based on global numbers and using percentages we felt were reasonable to arrive at our financial models. Only after doing due diligence and pleading the acquisition will we have specific numbers.”

During the second part of the session, the HOC committee met with AstraZeneca’s chief executive officer Pascal Soriot, its executive vice president Mene Pangalos and R&D vice president Jane Osbourn.

Committee chairman Miller opened proceedings in a similar ilk to that of Pfizer’s meeting, asking the AZ bosses if they thought the two companies would be a good fit.

“Our culture is fundamentally around science

AZ CEO Pascal Soroit

“The first thing I would say is that we have a strategy that is science-led and very focused on following the science and building a pipeline around cancer, cardiovascular, diabetes and respiratory medicine. Our culture is fundamentally around science,” said Soriot.

“As far as the compatibility of the two companies [is concerned], I think the issue that we could potentially face is a geographical issue in terms of bringing the two organisations together in particular for research and development.

Miller went on to suggest that what was being argued by AZ is that the company can deliver greater scientific value as an independent company, as opposed to a merged project.

“I think what we are saying is that we have a stand-alone strategy that can deliver value to patients but also to shareholders, and what we are saying is that our pipeline has changed dramatically in the last 18 months. It has increased and it has built quite a lot and we want to stay focused on delivering on this pipeline,” Soriot said.

“But of course we have to change, and we are changing every day and there is nothing wrong with changing, but the problem is when you actually throw people together that live on very different sides around the world, and you overlay this with a pretty substantial cost reduction, immediately what happens is people get a new boss and are not even sure if their job exists tomorrow,” he added.

Meanwhile, the committee also spoke with universities and science minister David Willetts about the issues which have been raised by the potential takeover of AZ.

Miller’s opening question addressed the issue of how “good” a deal between AZ and Pfizer would be for UK science?

“It’s very important that we protect the interests of UK science,” said Willetts.

“For me with my specific responsibilities, I would be very keen to understand what would happen if a formal bid were made and absolutely press very hard on the importance of maintaining science and R&D activity within the UK.”

In reply to Willetts opening statements, Miller asked how a merger would guarantee not to put Britain’s leading position in areas of scientific development and research at risk.

“There are two different types of guarantees and they complement each other,” Willetts said.

“One of course would be the undertakings that Pfizer made in the event their being a formal bid, and of course we are not at that stage, and that of course is a subject of very lively discussion.

“The second type of guarantee which compliments that is the guarantee that just comes from having world-class science happening in the UK. We encourage to do research in the UK because we believe the UK is the best place in the world to do science.”

“It’s very important that we protect the interests of UK science

David Willetts MP

One of the key issues surrounding today’s discussions, and indeed the ongoing AZ/Pfizer merger debate, is the question mark over the future of R&D development within the UK.

AZ chiefs have expressed their continued concern that a merger may disrupt the drug-discovery process and move R&D away from the UK, while cutting the number of scientists currently in Astra’s employ.

However, although Pfizer bosses have not been able to put exact figures on the amount of scientific staff it would need if a merger were successful, they were clear that combining the two pharmaceuticals giants under one banner would mean the “powerhouse” of science coming together, as Dolsten suggested.

A full account of this morning’s proceedings can be viewed here.

Committee chairman Miller later issued correspondence to David Willetts about the impact a takeover of AstraZeneca would have to UK science. That letter can be read here.