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Pfizer Inc. may have been rebuffed in its takeover bid for drugmaking rival AstraZeneca, but it isn't giving up without a fight.
The New York-based drug giant, which has its largest worldwide research contingent in Groton, said in press release today that the company plans to continue its pursuit of AstraZeneca, an English pharmaceutical firm, after informally offering nearly $100 billion for the company in January.
The offer, which would have included shares of Pfizer stock as well as cash, was about a 30 percent premium over what AstraZeneca stock was worth at the time, the company said. Pfizer said the deal is partially being driven by tax implications, because a merger would allow the company to change its domicile to the United Kingdom, enabling it to repatriate money made in other countries with a negligible tax bite.
"We believe AstraZeneca is an excellent strategic fit for Pfizer," said Ian Read, president and chief executive of Pfizer, in a conference call today. "It would create a stronger R&D platform with complementary portfolios across multiple key therapeutic areas."
"It's really a unique opportunity when you look at combining the two pipelines," said Mikael Dolsten, head of Pfizer's R&D, during the conference call. "It really would create a powerhouse."
Read, who said Pfizer's corporate headquarters would remain in New York City even if the pharmaceutical firm moves its official domicile to the United Kingdom, added that the combined companies would be able to "generate strong and consistent cash flow" in an "efficient operating structure" with "attractive synergies."
But AstraZeneca's board said in a release today that it considered Pfizer's offer inadequate.
"The board of AstraZeneca concluded that the proposal very significantly undervalued AstraZeneca and its prospects," the release said.
Read, asked during the teleconference about AstraZeneca's response, said he believes management and shareholders will come to understand that Pfizer's bid for the company will benefit them both.
"We're buyers, and they're sellers — of course they are going to say there's a value gap," Read said.
When Pfizer bought Wyeth for $67 billion, it slashed tens of thousands of jobs from the combined companies, including at least 1,100 research positions in Groton. The company, which predicted a cost-cutting potential of $4 billion annually from the Wyeth deal, said today that it had exceeded that amount.
"We believe patients all over the globe would benefit from our shared commitment to R&D, which is critical to the future success of the pharmaceutical industry," Read said in a statement.
Read added in the conference call that combining the internal research expertise of Pfizer and AstraZeneca would create a "compelling capability" for discovering and developing a wide range of medicines in cardiovascular health, immunology and inflammation and oncology.
"We have a proven track record when it comes to integrating large companies with minimal disruption to our business," Read said. "I really don't believe it represents a distraction."
Pfizer has 28 days to extend a formal offer for the company and could move forward as early as May 26 to begin getting regulatory consents and shareholder approvals for the merger.
Read pointed out that the merger fits nicely within Pfizer's new structure of creating three worldwide business units that potentially could be spun off into separate companies. He indicated that a merger with AstraZeneca would make the case for spinoffs more compelling because of a stronger product line and increased efficiencies.
"The principal driver is the proved growth prospects we see in the innovative business and the redundancies we can take out," Read said.
While the previous merger with Wyeth caused Pfizer to slash its dividend in half, Chief Financial Officer Frank D'Amelio pointed out that the payouts have come back strongly over the past three years to nearly return to their previous level.
"We get the importance of the dividend," D'Amelio said. "We will continue to have that front and center as we go forward in any combination."