Pfizer abandons takeover bid of UK’s AstraZeneca

Pfizer’s final proposal was compelling and represented full value for AstraZeneca, based on the information that was available, Ian Read, chairman and CEO of Pfizer, said in a statement.

AFP, Bloomberg/New York

US drug maker Pfizer said yesterday it had abandoned its controversial bid to acquire British rival AstraZeneca after its final $117bn offer was rejected last week.

The announcement was the latest twist to a long-running saga that drew widespread attention over fears that British jobs and research capability would be lost and accusations that the tie-up was a cynical ploy by Pfizer to pay less tax.

Pfizer’s takeover would have been the biggest deal of its kind in the pharmaceutical industry.

“Following the AstraZeneca board’s rejection of the proposal, Pfizer announces that it does not intend to make an offer for AstraZeneca,” the New York-based company said in a statement.

Pfizer had said that the combined company would deliver an expanded product pipeline, deep potential cost cuts and significant tax savings.

“We continue to believe that our final proposal was compelling and represented full value for AstraZeneca based on the information that was available to us,” Ian Read, chairman and CEO of Pfizer, said in the statement.

“As we said from the start, the pursuit of this transaction was a potential enhancement to our existing strategy.

“We will continue our focus on the execution of our plans, bringing forth new treatments to meet patients’ needs and remaining responsible stewards of our shareholders’ capital.”

Pfizer’s proposal also included a controversial plan to re-domicile the combined company in Britain for tax purposes, in a move that would help it avoid paying billions of dollars in tax to the US government.

AstraZeneca chairman Leif Johansson had attacked the US pharmaceutical giant’s pursuit of the firm, decrying it as “fundamentally driven by the corporate financial benefits to its shareholders of cost savings and tax minimisation.”

Responding to Pfizer’s withdrawal yesterday, Johansson said AstraZeneca “would continue building on the momentum we have already demonstrated as an independent company.”

“We have attractive growth prospects and a rapidly progressing pipeline,” Johansson said.

“AstraZeneca has a culture of innovation, with science at the heart of everything we do.”

AstraZeneca chief executive Pascal Soriot had resisted the Pfizer overtures, bullishly advising shareholders the company’s revenues would almost double to $45bn by 2023.

Analysts, however, have expressed scepticism that Soriot’s forecasts will prove accurate, speculating that AstraZeneca’s sales by 2023 would remain in the range of $28-31bn.

Pfizer’s play for AstraZeneca comes as global pharmaceutical giants maneuver to cope with lost revenues from public sector cutbacks in health care, and patent expirations.

But Pfizer’s withdrawal does not necessarily signal the end of the company’s pursuit of AstraZeneca, although under British law the US company must now wait six months before tabling another offer.

It could also make a higher bid in three months if AstraZeneca’s board agrees to a fresh round of takeover talks.

“The probability of a future AstraZeneca acquisition is dimmed, but not entirely extinguished,” said Mark Purcell, an analyst with Barclays, in a note to clients.

Esra Erkal-Paler, an AstraZeneca spokeswoman, and Joan Campion, a Pfizer spokeswoman, both declined to comment. Both companies set themselves up with massive expectations during a very public debate over the proposed deal.

AstraZeneca has predicted sales of $45bn by 2023, a 75% increase from last year. The company has bet heavily on a new class of cancer drugs that use the body’s immune system to attack tumours, experimental drugs Pfizer has said it covets.

“Soriot made a bet on the pipeline and he will be under pressure to deliver on the targets he gave to the market, which are very bullish and, in my opinion, not too realistic,” said Odile Rundquist, a Helvea analyst based in Geneva.

Much of the Soriot’s optimism about AstraZeneca’s revenue growth comes from the company’s roster of 71 experimental drugs aimed at ailments from diabetes to lung cancer. The company said they could yield as much as $63bn in peak-year sales.

AstraZeneca is also betting on its asthma and respiratory drugs; Brilinta, a blood thinner, and diabetes medicines it acquired from Bristol-Myers Squibb Co Together, the company predicts those drugs will generate almost $20bn by 2023.

The only transactions AstraZeneca has discussed are selling or finding partners for its antibiotics and experimental Alzheimer’s treatment.

“I’m surprised at AstraZeneca,” said Jeff Jonas, an investor at Gabelli & Co in Rye, New York, whose fund doesn’t own AstraZeneca shares. Their prospects as a stand-alone for the next three years “are pretty weak,” he said in a telephone interview. “They’ve been offered a great exit. I’m surprised they didn’t take it.”

Yesterday’s developments did not immediately impact the US and London stock markets, which were closed due to holidays. Pfizer’s share price had slipped by 0.6% in Friday’s trade to $29.49.