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AstraZeneca Says No Again

Now what? Pfizer has upped its offer for AstraZeneca yet again, and up to the figure that they seem to have calculated would bring them to the negotiating table. But AZ has told them to buzz off yet again, sending their own shares down hard. That’s because Pfizer also stated that they would not launch a hostile bid for the company and that the current offer was final, so there don’t seem to many more options.
I’ll be pretty surprised by this story if it ends this way. It’s possible that Pfizer is planning on AstraZeneca’s big shareholders putting pressure on the company before the May 26th deadline (mandated by UK law). Or they might turn around and try buying them again in the future, especially if anything goes a bit wrong with AZ’s turnaround plans over the next few months. But for now, it looks like we have the first case I can recall of a Company That Has Fought Off Pfizer.
But as that article I linked to the other day details, Pfizer has to do something about its tax situation. So if it’s not going to be the AstraZeneca acquisition (and we still have a few days on that one), then what? The last thing I expect them to do is just sit there.

22 comments on “AstraZeneca Says No Again”

  1. Andy says:

    And Pfizer has to do that something before the US wakes up and changes the tax inversion law.

  2. Teddy Z says:

    Pfizer could buy any of a number of smaller UK based companies, who would love to be bought, at an absurd price and probably put the rest of the cash in there as some sort of investment. Think Merck-SP reverse merger. Somebody is about to earn his bonus, mark my words.

  3. SFMS says:

    Really surprised that Pfizer shareholders have remained quiet about this proposed merger/acquisition. This would not have represented good value for them. The offer of 1.747 shares and ~£24 per share for AZ shareholders would (imo) not have represented good value either. Maybe Pfizer should just repatriate the money, pay the tax and pay out a decent dividend to it’s shareholders?

  4. Justin says:

    So now Pfizer can sit back, watch AZ fall a bit, and come back at them with a lower bid.
    Or maybe Pfizer can entice them with a Darth Vader quote: “If you only knew the power of the Dark Side.”

  5. Anonymous says:

    Why not buy Valeant?

  6. Roberto Ros says:

    Buy GSK? Now that would be interesting, one monster trying to eat another one … for some reason images of a dead python with a goat stuck in its throat come to mind.
    Seriously now, there are a few candidates out there, but not that many of the size required, I guess.

  7. The Aqueous Layer says:

    Matt Herper’s blurb in Forbes says it correctly. This is a passive-aggressive takeover.
    http://www.forbes.com/sites/matthewherper/2014/05/19/pfizer-goes-passive-aggressive-in-its-bid-for-astrazeneca/
    They put in a bigger bid and told the shareholders and board to take it or leave it. The board opted to leave it, but given AZ’s track record, there are probably some major shareholders that have to be thinking that the premium being offered is attractive.
    I’d be surprised if this were the end of it…

  8. Sharp Tool says:

    This definitely is the end of this particular courtship dance. For this season at least.

  9. Anonymous says:

    Some AZ shareholders are already moaning. Personally I think the merger is bad for patients – and science. U see those data on major causes of clinical attrition? ‘Financial Reasons’ – mainly duplicate programs after mergers and acquisitiions – being that main culprit.

  10. The Aqueous Layer says:

    Maybe the deal is sweeter now that AZ has lost 10% of its value today…

  11. Anonymous says:

    Pfizer should buy Wuxi and move to China, fulfill Chinese’s century long dream of owning their very own big pharma…and by that Chinese government will let Pfizer writes its own tax code. Check and check…it is a win-win situation.

  12. me says:

    Remember microsoft tried to buy yahoo with $32 per share and later yahoo valued at 11 or 12 per share.

  13. john says:

    For folks with long memories… AZ shares some of its DNA with ICI, which fought off the notorious old asset stripper Jim Hanson back in the nineties… they’ve still got it

  14. Inthebubble says:

    Now what? Realiszation finally dawns on Pfizer BoD that they have 2 CFOs – Ian Read and Frank D’Amelio – but no actual CEO. These two CFOs have been calling the shots for the last 4 years and instead of investing, they have given away the seed corn to shareholders via buybacks

  15. Sharp Tool says:

    The mega-merger model is outdated and it’s time the leaders of big business realised that. If Pfizer is hungry and really really wants this triple cheeseburger with fries and relish and loads of fizzy pop, it needs to learn that within a short period of time it will be hungry again. Better to be told “No! Go off now and find a proper delicatessen with olives and hummus and all that jazz. Feed properly and value yourself for who you are.”
    I do hope Derek’s blog has a distinguished readership.

  16. dichotomous says:

    @15 – If the industry has significant excess marketing, manufacturing, and research capacity, wouldn’t thoughtful mergers be a reasonable way to manage down that capacity? (I’m not saying Pfizer-AZ is reasonable, but just because Pfizer is bad at something doesn’t mean it’s inherently flawed.)

  17. Anonymous Big Pharma Researcher says:

    Astra-Zeneca says “right in Pfizer’s face”
    https://www.youtube.com/watch?v=MReV9dkAVhY

  18. Casual Observer says:

    @16 – if “excess capacity” were the problem with the industry, then sure. Especially if the problem were that there’s just too darn much R&D. But that’s not it.
    Pharma companies have big sales and marketing and administrative units, but pharma’s been very unsuccessful at creating enough new products to feed those machines. So they do megamergers and buy in products from somewhere else. Then they shut down the R&D that created those products.
    Problem is, that builds giant sales-and-marketing companies that are really terrible at running complex scientific R&D. So the problem of poor performance gets worse. Plus, now we’ve kept most of the whole sales and marketing machine, but we have *even less* total R&D going on.
    Then, when it turns out the merger didn’t fix anything, the easiest way for a not-too-bright manager to make his numbers look better is to cut R&D even further. Because that way he can save money right now, without hurting his revenue this quarter.
    What I’ve described there is a really bad idea, with all kinds of things wrong with it, but that’s how a lot of the mergers go. (Pfizer-AZ is mostly about tax rules, but it would probably play out the same way anyway.)
    Oh, and it’s also pretty bad news if you think you might get really sick someday, and need some top-rate medical research to help you out.

  19. anno says:

    @18, I cringed too when I read the “significant excess” line in #16. I agree that there’s not much of that in R&D at least. Actually, large mergers could regenerate the critical mass that we’ve need so badly and have lost over recent years, but scaling up research will be a non-starter while this industry’s run with such short-termism.
    If only those not-too-bright execs were judged on the state of their early and late portfolios after 10 years, rather than the three (or two, or one) year performance ratings they have now, which tend to say more about how well their predecessor was doing in the job anyway.

  20. anonymouse says:

    I don’t understand AZ’s management. This company, the sinking boat #1 in pharmaceuticals, is already overvalued and will never ever reach the value of the PFE offer 95.
    – AZ doesn’t have a good pipeline, even in oncology.
    – AZ doesn’t have any interesting science that PFE or other peers don’t have.
    – AZ certainly doesn’t have better scientists than its peers.
    If I was an AZ shareholder, I would be fuming right now.

  21. dichotomous says:

    @#18 and #19 – I agree that there’s way, way too much sales and marketing, and that the marketing folks generally don’t understand R&D at all.
    My argument of R&D overcapacity is simple – society is saying they don’t want to pay for new drugs. If you look at analyst / IMS predictions, revenue for the industry will be essentially flat for the next decade. If you believe that is true, then (in aggregate) companies will spend more on R&D in the next decade than they make over the lifetime of the new products, which means that the aggregate R&D is unaffordable. Whether you want to call that overcapacity or something else, the issue is the same.
    I would also agree that it’s a shame. The standard of care is quite poor for many diseases, and many talented scientists of my generation (in my late 30s) would love to work on them but will never be paid a reasonable wage to do so. Barring massive increases in basic research (unlikely in the US), they’ll never get the chance.

  22. johnnyboy says:

    @20: Maybe what the AZ board does have is an overarching desire to not see their company get flushed down the PFE toilet ?
    Maybe PFE should go for Shire instead. A lot cheaper, and probably a lot more open to selling out.

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