Deals and IPOs

Pfizer-AZ sparks protectionist sound and fury


U.K. politicians from the right and the left are piling in to give their two cents on Pfizer's $106 billion bid for AstraZeneca.

But for all bluster over the perceived threat to UK innovation and jobs should what would be the largest takeover of a U.K. based-company by a foreign competitor go ahead, there seems to very little they can actually change.

Adam Jeffery | CNBC

Ian Read, chief executive of Pfizer, and Paschal Soriot, chief executive of AstraZeneca, have been called to appear in front of U.K. lawmakers next week to discuss the ramifications of the deal.

Read MoreAstraZeneca's new attempt to foil Pfizer's plans

There is even talk of reforming U.K. takeover laws, currently among the most liberal in the world. The existing legislation allows for government intervention in media mergers, banks or takeovers where national security may be compromised. However, the government is considering running a "public interest" test in the case of Pfizer and AstraZeneca, which would measure whether the impact on the U.K. economy would be negative. AZ currently accounts for around 2.5 percent of U.K. exports.

Business Secretary Vince Cable said on Tuesday: "This would be a serious step and not one that would be taken lightly, but I'm open-minded about it."

Sweden, where AstraZeneca, formed from an Anglo-Swedish merger, still employs around 6,000 people, has also got involved, with one minister saying he is "skeptical" about Pfizer's plans. The U.S. giant previously slashed jobs at Sweden's Pharmacia after buying it in 2003.

Yet most in the industry are aware there is not very much the U.K. government can do.

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"We expect the recent flurry of noise coming from government to provide relatively little of substance and expect a further bid to materialise in coming weeks," Savvas Neophytou, pharmaceuticals analyst at Panmure Gordon, wrote in a note.

The current flurry of opposition seems to be aimed at securing a more extended commitment by Pfizer to keeping research and development in the U.K. – possibly over 10 rather than five years, according to one source close to the situation.

U.K Prime Minister David Cameron spoke on Wednesday of his wish for further commitments from Pfizer. "The commitments made so far are encouraging..I'm not satisfied, I want more," he told MPs.

Taking a nationalistic angle to this approach has a number of potential pitfalls.

The pharmaceutical industry, based as it is upon knowledge, is one where products are genuinely cross-border. Witness Pfizer's most famous product Viagra, which famously originated in Sandwich, Kent but had to go through mass clinical trials (and had its biggest sales) in the U.S. Or its potential breakthrough breast cancer treatment, palbociclib, which has just begun late-stage clinical trials, and was investigated by U.K.-based scientists after originating in the U.S.

AstraZeneca's pipeline itself is a tribute to this internationalism, and to a series of canny deals by former chief executive David Brennan. The retired chief executive must be smiling wryly at the praise suddenly heaped on the pipeline built in large part by him, a couple of years after investor unrest forced him from his perch.

There is a certain irony in complaining about AZ becoming an acquisition target when its drug pipeline exists largely because of the company's acquisition. AZ's $15.2 billion purchase of MedImmune has yielded a couple of AZ's most promising immuno-oncology drugs, one of which, MEDI4736, is now expected to fetch around $6.5 billion annually, according to the U.K. company's defense against the Pfizer bid.

Read MorePfizer $106.5B offer 'inadequate': AstraZeneca

Plus, AZ may be headquartered in the U.K., but much of its investor base is located elsewhere, as with many pharmaceutical companies.

And while any loss of U.K. jobs is unfortunate, AstraZeneca itself has been cutting its spend and headcount within research and development for years.

The hearts and minds Pfizer really needs to win over are within its prey.

"For any transaction, Pfizer needs to secure the support from key senior members of the AstraZeneca team and beef up, rather than cut AstraZeneca's R&D budget," Alexandra Hauber, analyst at UBS, argued.

Hiking its bid from £50 to the £55 a share now common among marketplace discussions wouldn't hurt either.