Pfizer research chief details case for possible AstraZeneca combination

Pfizer's R&D head Mikael Dolsten on Monday defended the company's research track record and its plan to acquire AstraZeneca, suggesting that such mergers do not disrupt drug discovery. "Pfizer has a legacy of being able to bring together cultures from different companies and add experiences from talents, from products and science, and move fast to make a new company," Dolsten remarked.

The executive said there is "a really great fit" between Pfizer and the products that AstraZeneca has in its portfolio, with the potential for combining drugs in areas such as lung cancer. Dolsten noted that Pfizer is currently working on about 300 projects with more than 80 in clinical development. "There are a lot of exciting projects moving forward," he commented, adding "a couple of years ago we started [an] R&D turnaround" as part of CEO Ian Read's plan to fix the company's innovative core. Dolsten said "we must stay laser-focused on our important projects. And that's, of course, true for Pfizer scientists and [AstraZeneca] scientists and will be true also if we can make a potential combination come together."

Earlier this month, AstraZeneca rejected a revised bid from Pfizer to acquire the company for 50 pounds per share ($84.47), saying it was "inadequate." Pfizer is expected to return with an improved offer for AstraZeneca ahead of a May 26 deadline, although people familiar with the situation suggest the bid will be made after UK parliamentary meetings into the matter this week.

The US drugmaker, which has given certain commitments to retain research in the UK, recently provided details aimed at further supporting its case to acquire AstraZeneca, saying a potential merger would "bolster innovative science" and "speed development of treatments." Dolsten commented "to see a combined company having a R&D presence with physical facilities and reaching out in biomedical networks to key investigators across many diseases in this UK area of biomedicine would be really inspiring, and I think it would create a very strong bridge to our global R&D activities and our strengths in biomedical hubs in US." Pfizer confirmed Monday that "to ensure our commitments are binding, we included them with our proposed offer announcement understanding fully that they would be binding as a matter of English law."

However, analysts have questioned whether Pfizer's bid for AstraZeneca is underpinned by the latter's pipeline of experimental drugs or about potential tax savings. Deutsche Bank analyst Mark Clark said "without a doubt, tax is a major motivation. It doesn’t work financially on most people’s calculations without the tax benefit." Bloomberg Industries analyst Sam Fazeli added "if you took away the tax issue, I don’t know whether [Pfizer] would be interested."

Last week, AstraZeneca said it is targeting sales of between $23 billion to $63 billion from its pipeline depending on the proportion of drugs that receive regulatory approval. Birgit Kulhoff of Rahn & Bodmer Co. noted that if Pfizer buys AstraZeneca "because of the R&D, they will have to ring-fence the R&D completely," which she suggested would put a damper on cost cuts and earnings growth. "However, if they buy it because of taxes, well, then I think they will make big cuts," Kulhoff said.

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