Financial Times Reporter Cardiff Garcia joins us to talk about the U.S. pharmaceutical giant Pfizer’s $100 billion offer to buy British-Swedish drug maker AstraZeneca.
JEREMY HOBSON, HOST:
This is HERE AND NOW from NPR and WBUR Boston. I'm Jeremy Hobson.
New York based Pfizer has approached the Anglo-Swedish drug maker AstraZeneca about a possible $100 billion takeover. The merger would create the world's largest drug company. Joining us from New York is Cardiff Garcia, reporter with the Financial Times. Hi, Cardiff.
CARDIFF GARCIA: Hey, Jeremy.
HOBSON: And this is Pfizer's second attempt to try to take over AstraZeneca. Why does Pfizer want that so badly?
GARCIA: Quite a few reasons, actually. I mean, the main strategic reason, I think, is that they see the potential for a lot of overlap, a lot of complementary aspects to AstraZeneca's oncology treatments, in particular, its cancer treatments.
But it also, the company also would give Pfizer more reach into emerging markets. The new company would be domiciled in London, which means - or excuse me, in the U.K., which means that essentially it would get a more favorable tax treatment.
There's also competitive pressures from other, you know M&A, other mergers and acquisitions happening in the sector, and so Pfizer wants to keep up. And finally, remember that Pfizer's a very large company, a very large drugs company, which means that it's constantly loosing patents on some drugs, so it wants to keep rejuvenating its pipeline. So there's actually quite a few reasons involved here.
HOBSON: Well, and you mentioned that we spoke last week about Novartis and some deals that they were doing to try to consolidate and acquire new things and focus on what they're best at. What does this mean for consumers though? It certainly hasn't been good in the airline industry for consumers to have consolidated airlines that can then charge more money.
GARCIA: Sure. So this is a fascinating question. And the answer is that it really depends on what happens after the merger. So you mentioned Novartis and GSK, GlaxoSmithKline, last week combining.
GARCIA: That was actually an asset swap, and I thought it was very encouraging in that both companies are trying to focus on the areas where they have a lot of expertise. On the other hand, there's another merger between a company called - or a proposed merger between a company called Valeant and Allergan. It hasn't happened yet, but we know that Valeant, for instance, is very acquisitive company. It buys companies, but then it lowers their cost.
Now, if one of those costs that gets cut is research and development, then there's a problem if this happen on a very wide scale, because a lot of spending on research and development that might look wasteful as it's happening ends up paying off big time down the line. And so if research and development is cut too much, then the problem for consumers or just for the health care industry in general is that you might have fewer breakthrough drugs.
So it really, really depends on what happens after the fact. But that is, I think, the key question about what's happening in the pharmaceutical sector and in healthcare generally.
HOBSON: Well, is that the expectation that more combined companies, or one big Pfizer AstraZeneca company would mean less research and development?
GARCIA: We actually don't know. I think if you look at AstraZeneca in particular, it actually has a pretty good recent track record in research and development. It has, for instance, a partnership with the U.K. government. But Pfizer itself has actually been cutting R&D, and so it's tough to know exactly what it would do after the fact, where it would try to cut costs.
So you know, it's hard to say. I would say that, you know, one offsetting thing here is that there's always the possibility that a new company or a younger company or a smaller company will increase its research and development to offset whatever kind of cuts are happening as the sector consolidates. That's always a possibility that there'll be a new entrant.
So, you know, the only answer to that question is I don't know, but I hope that if they cut R&D, it's not too much.
HOBSON: And Cardiff, just a one word answer here. Would you say, in general, that all this consolidation in the industry is a sign that the pharma industry is healthy or not?
GARCIA: It's not a sign of either of either health or a lack of health. If anything, it tells you more about what's happening in financial markets, and the ability of companies to combine is a little bit better now because the stock market has been doing better. And it gives them the ability to pay in shares of their own companies. So it makes it easier to consolidate. But it doesn't mean necessarily anything about pharmaceuticals in general.
HOBSON: Cardiff Garcia of the Financial Times. Thanks, as always.
GARCIA: Thanks so much, Jeremy.
HOBSON: You're listening to HERE AND NOW. Transcript provided by NPR, Copyright NPR.