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Pfizer says UK jobs pledge legally binding Pfizer reiterates its commitment to fostering research - and praises UK's low corporate tax
(about 20 hours later)
Pfizer has said it will keep its promises about retaining high-skill jobs and manufacturing in Britain as the US firm's boss prepares to face questions from MPs on the proposed takeover of AstraZeneca. The boss of Pfizer will today publicly praise the government for creating a friendly, low-tax environment which encouraged the US drugs giant to bid £63bn for AstraZeneca in what would be the biggest foreign takeover of a British company.
In written evidence to the business, innovation and skills (BIS) select committee, Pfizer said its earlier pledges on investing in the UK were legally binding and that combining the two pharmaceutical firms would create and protect high-value jobs. The Guardian understands that Ian Read, the Scottish-born chief executive of Pfizer, will begin his evidence to MPs in parliament today by praising the government for creating an attractive environment for investment by, among other measures, lowering the corporate tax rate to 20%, compared with 40% in the US. Read will also highlight George Osborne's special "patent box" 10% tax rate on products derived from British inventions.
"With our commitment to foster research and development in the UK, we are matching words with deeds – and we will keep our word," Pfizer said. His comments are likely to fuel more political outrage on both sides of the Atlantic that Pfizer's takeover plans are partly motivated by saving on multimillion dollar US tax bills. Chuka Ummuna, the shadow business secretary, has accused Pfizer of treating AstraZeneca as a "pawn in some tax-planning game".
Pfizer's chief executive, Ian Read, wrote to David Cameron last week pledging to complete AstraZeneca's research and development centre in Cambridge, employ at least 20% of the combined company's R&D workforce in the UK for five years, and locate some manufacturing in Britain. US senator Carl Levin has pledged to close the "tax inversion loophole" that Pfizer is planning to take advantage of by relocating its tax domicile – although not its headquarters – to London. "I've long been concerned about inversions – companies moving offshore on paper, for tax purposes, while the management and operations remain in the US," he said. Buying AstraZeneca would allow Pfizer to spend its $63bn (£37bn) pile of cash from overseas profits without bringing it back to America, where it would be subject to US taxes.
Pfizer said the assurances were legally watertight because they were published with the company's takeover proposal for AstraZeneca. Under Britain's takeover code, the pledges created a legal commitment and should "be given full weight", Pfizer said. Adrian Bailey, chair of the Commons business select committee, said Read would be subjected to intense questioning about the tax issue. "We need to deeply probe this deal," Bailey said. "There are issues about the level of commitment to the UK and how robust they are."
But the US firm, which has a reputation for preferring cost cuts over investment in treatments, offered no new assurances to the government. Sweden's finance minister, Anders Borg, said last week that Pfizer had failed to honour similar assurances on research jobs it made when it bought the Swedish drugmaker Pharmacia in 2002. Read will also praise Britain's position at the forefront of research and development and promise to employ at least 20% of the combined company's R&D workforce in the UK. Despite Pfizer insisting yesterday that the guarantee was "legally binding", it would apply for only five years.
Read, Pfizer's Scottish-born boss, flies in to the UK for his first public defence of the proposed £63bn takeover. He will face questions from the BIS committee on Tuesday and the science and technology committee on Wednesday amid growing political concern about the damage the deal could do to Britain's science base. Bailey said a commitment of just five years was "inadequate". "Virtually all scientific bodies say you need a much longer commitment in order to develop new medicines," he said.
Pfizer has made a string of acquisitions since 2000 that critics said slashed research spending to boost profits and make up for the paucity of the firm's drug development programmes. The Pfizer reinforced its reputation as a ruthless operator in 2011 when it announced the closure of its research centre in Sandwich, Kent, with the loss of 2,400 skilled jobs. In its written evidence to the Commons committee, Pfizer said combining the two firms would create and protect high-value jobs. "With our commitment to foster research and development in the UK, we are matching words with deeds – and we will keep our word," Pfizer said.
AstraZeneca has tried to ward off the unwelcome takeover approach by emphasising the opportunities it has to bring new drugs to the market compared with Pfizer. It has warned that research will be damaged if the takeover attempt is successful. Read will face further questioning tomorrow when he appears before the science and technology committee.
Mergers in the drugs industry typically slow scientific development as research is put on hold while the companies decide what activities to cut. Pfizer said its assurances – which include completing AstraZeneca's R&D centre in Cambridge and locating some manufacturing in Britain – were legally watertight because they were published with the takeover proposal for AstraZeneca. Under Britain's takeover code, the pledges created a legal commitment and should "be given full weight", Pfizer said.
In its statement to the BIS committee, Pfizer praised AstraZeneca's drug development prospects but said the Anglo-Swedish firm needed Pfizer's financial clout to see treatments to fruition. But the US firm, which has a reputation for preferring cuts over investment, offered no new assurances to the government beyond those made in a letter to the prime minister earlier this month.
"Development of pharmaceuticals is an extremely expensive and risky business. AstraZeneca's ability to deliver its pipeline will require very substantial investments during a time when the company's revenues will be declining sharply as a result of the loss of patent exclusivity on important products. Pfizer has made a string of acquisitions since 2000 that critics said resulted in slashed research spending to boost profits. Pfizer reinforced its reputation as a ruthless operator in 2011 when it announced the closure of its research centre in Sandwich, Kent, with the loss of 2,400 skilled jobs.
"A combined Pfizer-Astra-Zeneca would provide a financial engine that could support robust, yet thoughtful R&D investment," it said. Anders Borg, the Swedish finance minister, has warned British MPs to take Pfizer's promises with a "sackful of salt" after the company reneged on jobs and R&D promises following its takeover of Sweden's Pharmacia. The number of employees there has dropped 90% since the takeover 12 years ago.
AstraZeneca has said the US company's interest was a distraction at a time when the former's investment in new treatments was bearing fruit. AstraZeneca has tried to ward off the unwelcome takeover approach by emphasising the opportunities it has to bring new drugs to the market compared with Pfizer. It has warned that research will be damaged if the takeover attempt is successful. Mergers in the drugs industry typically slow scientific development as research is put on hold while the companies decide which activities to cut.
AstraZeneca set out a plan for revenue growth last week in which it stressed the opportunities it had to treat cancer, diabetes and respiratory illnesses. The firm said on Monday that its brodalumab treatment for psoriasis, developed in partnership with Amgen, had achieved positive results in a phase III study. In its statement to the business committee, Pfizer praised AstraZeneca's drug development prospects but said the Anglo-Swedish firm needed Pfizer's financial clout to see treatments to fruition.
As part of a multi-pronged charm offensive before Read's appearance before with MPs, Pfizer's head of R&D, Mikael Dolsten, said the company wanted to buy AstraZeneca so it could develop more drugs and rejected claims that a takeover would slow the Anglo-Swedish firm's treatment programme. "Development of pharmaceuticals is an extremely expensive and risky business. AstraZeneca's ability to deliver its pipeline will require very substantial investments during a time when the company's revenues will be declining sharply as a result of the loss of patent exclusivity on important products. A combined Pfizer-Astra-Zeneca would provide a financial engine that could support robust, yet thoughtful R&D investment," it said.
"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 said. AstraZeneca has said the US company's interest was a distraction at a time when the former's investment in new treatments was bearing fruit. The British firm set out a plan for revenue growth last week in which it stressed opportunities to treat cancer, diabetes and respiratory illnesses.
Dolsten, who will also appear before MPs on Wednesday, said Reed had refocused Pfizer on finding new drugs and that it was working on about 300 projects, with more than 80 in clinical development. New products reaching patients include a treatment for rheumatoid arthritis, a medicine for lung cancer and vaccines to protect children against pneumonia. A poll for the Unite union found only 14% of respondents thought the takeover was in Britain's national interest. The Survation poll of 1,005 people also found that just 19% were confident the coalition was doing enough to safeguard British jobs. Len McCluskey, Unite general secretary, said: "Pfizer's track record is one of slashing jobs and cutting costs and its 'guarantees' could evaporate at any moment."
Dolsten's claims followed video statements by Read at the weekend in which he claimed a deal would be a "win-win" for all concerned. Read has tried to play down Pfizer's reputation as a slasher of costs and to present the company as an enthusiastic investor in new treatments.
Labour has called for a public interest test for the deal while Lord Sainsbury, a former science minister, has said Pfizer's bid should be blocked. After welcoming Pfizer's plan to base the combined company in the UK for tax reasons, Cameron has hardened his stance on the potential deal.
With politicians and scientists increasingly questioning the proposed takeover, Pfizer has sought to dispel speculation that it will cut thousands of highly skilled jobs and damage the government's aim of making Britain a centre for scientific research.
But Andrew Miller, the Labour chairman of the science and technology select committee, has called for guarantees to last at least 10 years to reflect the time needed to develop new drugs.
AstraZeneca has twice rebuffed approaches from its US rival. Pfizer's second approach offered £50 a share, mainly in Pfizer's shares, but the company is expected to come back with a new bid this week with a bigger cash element.AstraZeneca has twice rebuffed approaches from its US rival. Pfizer's second approach offered £50 a share, mainly in Pfizer's shares, but the company is expected to come back with a new bid this week with a bigger cash element.