Five questions Pfizer must answer

Ian Read, CEO of US pharma-giant Pfizer, steps before the Commons’ business select committee today and the science and technology committee tomorrow. His company seeks the biggest takeover in global history, swallowing UK-based pharmaceutical star AstraZeneca.

Mr Read, who personally stands to make £70 million from any deal, has a lot of convincing to do. Among the crème de la crème of UK science, Nobel prize winner Sir Paul Nurse president of the Royal Society and Sweden’s finance minister (AZ is an Anglo-Swedish company), alarm bells are ringing. Public faith is ebbing too. Unite had found that more than eight in ten people are not convinced this bid is in the public interest.

Only when murky links between the Conservatives and Pfizer’s representatives emerged did Chancellor George Osborne’s language become more nuanced, with his saying he would be `hard-nosed’ about any deal. Against this turbulent backdrop, and with so much at stake for the 6,700 directly employed by AZ in the UK and the tens of thousands more in the supply chain, we, the workers’ unions, suggest that there are five key questions Ian Read must answer today and tomorrow:

1. Why has Pfizer undervalued the company?

Independent analysts suggest that AZ’s share value is at least £100 per share. That is because of the exceptional nature of the products it is bringing to the market. Pfizer opened with £38 per share. Is this a cheeky opening offer or a deliberate effort to talk down the value of the jewel in our pharmaceutical crown?

2. How robust are Pfizer’s guarantees on jobs and investment?

Shadow business secretary Chuka Umana has described the assurances as `not worth the paper they’re written on’. He’s right to be worried.

MPs have floated the idea of a ten year guarantee for jobs but with Pfizer’s past form it may need more than that.  Consecutive Pfizer CEOs have reduced budget, employees and medical specialisms. Cash is stockpiled, yes, but that is in order to make an acquisition to compensate for inherent weakness of Pfizer’s own R&D capacity, and to avoid the US tax system.

A year after purchasing Warner-Lambert (makers of Listerine mouthwash), Pfizer reduced R&D budget from 16.5% to 15.6%; when competitors maintain levels of at least 20% this matters. Jobs were cut as was the company’s scope of activities “to improve performance”. Faced with dwindling output, two years later, Pfizer was forced to purchase Pharmacia.

Ian Read offers more of the same. Having previously managed R&D in the company as CEO he cut his former department’s budget from 13.8% to 12.7% in 2013, jobs and the company’s scope. Now, three years later, faced with weak output, Pfizer seeks to acquire AstraZeneca.

The deal on the table provides no protection for the 6,700 AZ workforce. In Macclesfield and Alderley, they fear closure of the sites in the North West, destroying local communities. Those, who elected to move to the new AZ site in Cambridge, are now worried about the long-term future.

3.  What will this acquisition mean for UK manufacturing?

Spin off products and intelligence emerging from AZ products can be found right across our manufacturing hinterland, from laboratory equipment to IT to bulk chemicals.  Again, British jobs and skills supporting other British jobs and skills.

AZ, a company that accounts for 2.3% of UK exports and invests £2.8 billion in research and development, is, as Professor David Bailey puts it “about as strategic a UK company you can get.”

4. Will Pfizer use its near-monopoly status to force up the cost of drugs to the NHS?

Perhaps an under-discussed issue of public concern about this bid is what would the concentration of ownership of and access to life-giving medicines do to the NHS’s drugs bill? AZ has a number of new products to come on stream; would Pfizer’s control of these medicines hike up their cost to the NHS? Already facing a £30 billion spending gap, pressure on the NHS drugs budget will be intolerable.

5. If Pfizer’s bid is nothing to worry about, submit it to a ‘public interest’ test

Pfizer wants access to AZ’s drugs pipeline and to take advantage of the UK’s low tax regime. (Note to the Chancellor: this was meant to attract inward investment not mega takeovers costing jobs and instability for the UK’s manufacturing base.) Pfizer’s business history causes unease: in the eight years to 2013, it shed 65,000 employees. An anxious nation seeks reassurance – even 77 per cent of Tory voters polled this weekend by Survation said `they wanted the bid scrutinised for public impact, compared to 74 percent generally. Mr Read today has the opportunity to offer that by saying that Pfizer will submit its bid to a `public interest test’ to assess fully the economic, scientific and social consequences of takeover.

This ‘zombie’ parliament could be put to good use amending takeover law to secure this scrutiny before any sale of AZ. On this as so often, while the prime minister has misread the public mood, Ed Miliband gets that people want government to be their champion. Business, science, the public and trades unions and the Labour Party speak as one on this. It is time now for Pfizer to do the convincing.

Tony Burke is Assistant General Secretary of Unite