Why Pfizer's numbers don't add up to 20% of anything
Jim Armitage is the City editor of The Independent and London Evening Standard group of newspapers. He has been a reporter and editor for more than 20 years and was recently shortlisted for the Press Gazette financial journalist of the year and The Society of Editors financial journalist of the year awards. He contributes news, investigative reports and comment to the Independent titles plus a daily column in the Evening Standard.
Thursday 15 May 2014
Outlook Mike Ingram, a market strategist at the City brokers BGC Partners, confesses he's no expert in pharmaceuticals. But he does know a thing or two about grinding down financial numbers. Which is why when he says Pfizer isn't talking straight when it comes to its planned job cuts for AstraZeneca, we should take heed.
I'll keep his workings-out to a minimum, but essentially, he calculates that to justify Pfizer's likely next bid price of £55 per Astra share – a $37bn premium on Astra's original stock market value – Pfizer must cut Astra's R&D spend by a third. That's even if it manages to save $1.2bn of US taxes a year by using London as its tax haven base. Mr Ingram actually thinks it will have to be well over a third (which represents 3,000 scientists' jobs), because he uses generous assumptions about Pfizer's growth potential.
Pfizer may stick to its supposedly legally binding pledge of retaining 20 per cent of global R&D jobs in the UK, but, if Mr Ingram is right, we should ask the question: 20 per cent of what?
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