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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: derekb.lowe@gmail.com Twitter: Dereklowe

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« Another Whack at the Cost of Drugs Issue | Main | AstraZeneca Tell Pfizer to Buzz Off »

May 1, 2014

Can Anything Stop Pfizer-AstraZeneca From Going Through?

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Posted by Derek

At FierceBiotech, John Carroll asks the question that's on a lot of drug-industry minds this week: can anything stop Pfizer's takeover of AstraZeneca?

There are a few possibilities, but overall, it comes down to how much money Pfizer wants to spend. If they open their wallet far enough, they can buy most anyone they want. As long as the UK's tax structure stays as it is, I think that they'll keep right on pitching. (Now, if another prime minister comes in whose government has a different view on corporate taxation, that could make Pfizer regret things, but they're clearly willing to take that chance). No, they did the same sort of thing to Wyeth, to Pharmacia-Upjohn, and to Warner-Lambert, without these sorts of tax considerations, so I don't see why they wouldn't do it to AstraZeneca, too. Well, short of not wanting to destroy another big drug company. But that's not on Carroll's list, and not on mine, because it sure isn't a consideration for Pfizer, is it?

Comments (30) + TrackBacks (0) | Category: Business and Markets


COMMENTS

1. Bring the Movies on May 1, 2014 10:19 AM writes...

I see the plan.

Pfizer buys as many drug companies as possible to create a monopoly on drug supply prices.

Next. Pfizer though pHARMA continues to buy off American legislators to insure that Section D of Medicare cannot negotiate, and therefore pays full price for the rising cost of Pfizer drugs, so as to create a monopolized demand for Pfizer drugs.

Next, you will see Pfizer taking control of the food industry to drive out healthy food providers to insure that people are obese and sick as possible, to further increase the demand of medicare-paid Pfizer drugs.

A very fiendish plan.

Its the beginning of the endgame for the American taxpayer.

Pfizer is the American Death Star....

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2. pgwu on May 1, 2014 12:11 PM writes...

A few twits mentioned others as a white knight for AZN. I find the use of "white knight" by several people amusing. PFE is probably no better or worse than other pharmas or biopharmas. The merger seems to be intended to do well for a few without doing good.

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3. The Aqueous Layer on May 1, 2014 12:15 PM writes...

Bloomberg is now saying the Pfizer is willing to sweeten the deal to $106B with more cash involved.

They are certainly playing hardball.

http://www.businessweek.com/news/2014-05-01/pfizer-said-to-plan-sweetening-astrazeneca-bid-with-cash

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4. oem chemist on May 1, 2014 12:20 PM writes...

tax laws can make it difficult. check out shearlingsplowed . blogspot . com for some analysis

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5. AndD on May 1, 2014 12:27 PM writes...

Another potential hurdle - Chinese regulators?

See http://www.bbc.co.uk/news/business-27245997

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6. rico on May 1, 2014 1:42 PM writes...

my apologies to the many great scientists who currently work at Pfizer but it needs to be pointed out that great science no longer happens there nor is it important to the company…the company is behaving like a hedge fund and investing in tax arbitrage (avoidance) schemes vs new products - where is the statement from the CEO of how patients benefit?

Thought experiment: 2 companies - one announces a new product that will increase revenue by 10 percent, one announces an HQ move that will reduce costs due to a new tax regime that will result a revenue increase of 10 percent. Net earnings are the same for both…is one better than the other? Who would you want to work for?…the most amazing aspect is that Pfizer is clearly banking on the desperation of politicians who want to keep jobs in the UK (meaning that the government will adhere to current tax policy) OVER the ability of their company to discover (or purchase) new products…

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7. Dr Manhattan on May 1, 2014 1:46 PM writes...

"Next, you will see Pfizer taking control of the food industry to drive out healthy food providers to insure that people are obese and sick as possible"

Would you like Pfries with your Quarter PFounder? Be sure to try our new vanilla Pfrappes!

Seriously, whatever happened to Anti-Trust laws, the laws governing restriction of competition and cartels? How much needs to be destroyed in the way of competitors before those kick in?

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8. Sweden Calling on May 1, 2014 3:12 PM writes...

"AstraZeneca is a British-Swedish multinational pharmaceutical" at least according to Wikipedia. Anyone seen Sweden mentioned in this discussion so far? Naive assumption that that would happen I guess.
Your right Derek, This is all about the money....and UK vs US.

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9. Mad Dog on May 1, 2014 3:38 PM writes...

@ #6 I could not have said it better myself. Pfizer is a company with pharmaceutical assets; they are no longer a pharmaceutical company.

When did the switch get flipped? I go back to the take over of PD-WL. That was THE moment that $$$ took over and marked the desolation of Pfizer. Since then the mighty dragon has laid waste to many others such that entire CITIES (Kalamazoo) were laid to waste in the name of greed. Someone please find the soft underbelly before they smote the entire industry.

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10. ScientistSailor on May 1, 2014 4:48 PM writes...

one of my colleagues who is new to the industry just asked me what this merger would mean, I replied 'the end of all science' it's like crossing the streams...

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11. Landkreuzer on May 1, 2014 4:56 PM writes...

Past visionaries also believed bigger was better http://en.wikipedia.org/wiki/Landkreuzer_P._1000_Ratte

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12. Anonymous on May 1, 2014 5:07 PM writes...

Chairman of the board is from Sweden

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13. gippgig on May 1, 2014 7:46 PM writes...

Off topic, but may be of interest:
Next week Frontline on PBS is scheduled to show the story on antibiotic-resistant bacteria.
The latest issue of Science News (May 3) has a story on the controversy over the mechanism of killing by antibiotics.

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14. Pete on May 1, 2014 7:55 PM writes...

#11, As Uncle Joe is said to have said, "Quantity has a quality all of its own"

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15. Pete on May 1, 2014 7:55 PM writes...

#11, As Uncle Joe is said to have said, "Quantity has a quality all of its own"

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16. sp3 on May 1, 2014 8:45 PM writes...

As most readers of this column are chemists, we tend to forget that innovation can happen outside of the lab. Pfizer has been a leader in innovation in marketing, legal, and finance. This is just another case of a creative way to drive shareholder value. Science is failing at most large pharma due to the constant disruption and large percentage of time required by scientists on nonsensical corporate initiatives.

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17. Lunar Landing on May 1, 2014 8:48 PM writes...

I am in no way a tax or money savant but how is this deal a good one for PFE? AZN has very little in terms of a pipeline, minimal assets in terms of products. Why wouldn't you simply take $70 billion and put it in the bank at 3-5%. $350 million could buy you a lot of innovation every year w/o all of the hassles of divesting f-AZN assets and people. I realize this is naive but I am struggling to make sense of this ... even from a tax haven perspective. Also, if our House and Senate were not completely ineffective and feckless they would be trying desparately to put a stop to this or amend our current tax
structure to make it more accomodative to repatriate this money. Good luck with that! This is going to continue to happen in other industries - mark my word.

PS There's quantity in numbers.

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18. Bioorganic Chemist on May 1, 2014 8:51 PM writes...

Another loss if this proceeds: even further cost pressure will be put on CROs by Pfizer, as it is able to turn the screws on pricing even more than they are already notorious for doing now. (Ex-pharma colleagues at CROs hate working with Pfizer for this reason, but the total volume of Pfizer contracts makes it very difficult to ignore them.)

And the wages for scientists in CROs get driven down even further...

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19. A Nonny Mouse on May 2, 2014 3:22 AM writes...

Latest news this morning in the UK is that Pfizer has upped the offer and has agreed that 20% of its research will be in the UK! How long will that last? If they keep reducing research globally, that can go pretty low.

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20. Realist on May 2, 2014 3:28 AM writes...

Looking like 50 quid a share should grease the pertinent palms.

So there we have it - Pious promises about R&D spend, but the market rules Britannia and sooner or later all will end in the tinkling and crashing of round bottom flasks...

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22. Anonymous on May 2, 2014 5:35 AM writes...

AZ shareholders want more money

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23. anonymous on May 2, 2014 8:56 AM writes...

Pfizer is the grasshoppers of the whole pharma industry, they devastate one pipeline after the other...

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24. rico on May 2, 2014 9:32 AM writes...

@16 - I agree that big pharma needs to look outside for innovation however as you erode your internal science (by lay-offs and chronic message sending of no confidence in internal scientists), who will you depend on to evaluate all the external possibilities? in the early stages of this trend, where there is a rich list of late stage programs to purchase, the calculations for ROI are easy - even the McKinsey guys can do it. Eventually these will be gobbled up and inevitably, a company like Pfizer will have to look at biotech portfolios for earlier and earlier programs and they will no longer have cutting edge expertise internally to evaluate thus leading to serious misjudgments.

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25. aa3 on May 2, 2014 4:34 PM writes...

Taking a competitor out may be healthy for the industry in the long run. In the exciting new areas there always seems to be 3 companies with late stage programs in that area. That each are hitting the same target, in the same way, just slightly different compounds.

As the purchasers of medicine have consolidated into fewer entities, using scale to drive down prices. So too do the pharma companies have to scale up in order to negotiate. Otherwise the payers play the pharma corporations off against each other and drive the price down to the bare minimum.

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26. Pedantic Speaker on May 3, 2014 10:14 PM writes...

There is a relevant story I found that takes the angle of antibiotic development and ties in with what @23 wrote.

http://www.rawstory.com/rs/2014/05/03/world-health-at-risk-if-drug-companies-dont-invest-in-new-low-profit-antibiotic-research/

"For a profit-maximising drug company such as Pfizer, there is an obvious conclusion. Don’t waste valuable R&D on low-margin antibiotics that are never going to become super-profitable blockbusters. Instead, develop, say, Viagra (as it has), which is a high-margin, global money spinner. Exploit your financial muscle by avoiding as much tax as possible – other mutts can fund the infrastructure from which you directly benefit – and try to buy up other drug companies, such as AstraZeneca, which has been foolish enough to invest in drugs that are more integral to the entire medical ecosystem. You can harvest the results of their efforts, pocket your vast meta-bonus and buy an island in the Pacific. You may even be lucky enough to encounter a misguided, weak government – like the UK’s – that believes this is the way to do business."

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27. Nick K on May 4, 2014 6:21 AM writes...

Why doesn't Pfizer simply go the whole hog and turn itself into a hedge fund? Less risk, better ROI, lower overheads, no more expensive and uncertain R&D.

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28. Alex S on May 4, 2014 9:08 PM writes...

They are a hedge fund. Their primary investment strategy at the moment is corporate tax arbitrage. Same thing with Valeant.

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29. Chris Swain on May 5, 2014 1:38 AM writes...

I see the learned societies in the UK have spoken up.

http://www.rsc.org/AboutUs/News/PressReleases/2014/response-Pfizer-AstraZeneca-takeover.asp

I'm not sure who is listening though.

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30. Anonymous on May 5, 2014 8:03 PM writes...

#29 Chris Swain: The RSC has spoken! Ian Read is no doubt quaking in his boots...

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