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Why is Pfizer after a mega-pharma merger with AstraZeneca?

by Derek Del Simone on May 1, 2014
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As a Life Science Recruiter I see the push from Pfizer to acquire AstraZeneca as a stance of weakness, coming from various factors including; a number of block buster drugs coming of patent the last few years, i.e. Lipitor & Viagra. A string of drugs with patents due to expire, some disappointing drug launches and a shortage in its product research pipeline of impressive drugs.

Pfizer has faced a decade without any attractive new drugs, over the last couple years it has been pinning its hope to its treatments for Kidney Cancer (Inlyta) and Lung Cancer (Xalkori), however both drugs have has weak sales. Predicted blockbusters treatments for rheumatoid Arthritis (Xeljanz) and Eliquis to prevent blood clots, have failed to bring in the billion dollar sales predicted. While their experimental drug and most exciting in development, Palbociclib from Breast Cancer; will face hard competition from other pharmaceutical companies who have more effective and safer drugs being developed.

This AU$100 billion+ proposal helps detract shareholder concerns from the low returns in research and development, and refocussed them on the future potential cost savings, some analysts are saying somewhere in the region of $4 billion annually; and if Pfizer rebases itself in Britain it will knock down its tax rate, which will also include the tax advantages from the “patent box” which was recently put into place, which offers companies who hold IP in UK, breaks on the profits from the IP.

Most importantly it will add AstraZeneca’s lucrative early stage cancer drugs that work by stimulating the body’s immune system to recognise and attack cancer. AstraZeneca has several of its own immune based drugs to treat multiple cancers, in January it announced an agreement with Immunocore to develop new treatments that use immune cells. An acquisition would also see an expansion of its established therapeutic areas such as Cardiovascular drugs and significantly increase Pfizer’s presence in Diabetes and Vaccines, both areas Pfizer is relative weak in.

As they say past behaviours predict future behaviours; and with the many mergers Pfizer has undertaken over the past decade we have seen them implement “Their strong record on Synergies” and reduced thousands of jobs and billions in costs were saved. In 2009 with the acquisition of Wyeth which had revenues of US $22.4 billion in 2008, Pfizer said it would slash 20,0000 people from the workforce and $4 billion in costs. It achieved over $4 billion in cost cutting and by the end of 2009 the work force wall already culled from 129,226 to 116,500.

Over the years we have heard that mergers hinder Innovation in Life Science. Mergers see Research and Development shift from a science focus to integration focus; resulting in not only departments being merged and budgets cut but innovation is stalled. I wonder what effects a merger this size will have on not only have on innovation but also the workforce within R&D?

More so my thoughts turn to the local Australian work force and what the impact will hold for the total of over 2500 employed at Pfizer and AstraZeneca and the manufacturing facilities that are responsible for over $300 million in exports a year.

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