Comment: Shire shores up defences | HS2

Martin Flanagan
Martin Flanagan
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KEEP taking the tablets. That seems to be the strategy of international (particularly American) Big Pharma these days as the sector sees merger and acquisition activity as Route A out of its difficulties.

These pressures include major blockbuster drugs coming out of patent to be faced with cheaper, generic competition; expensive R&D programmes to bring the new generation of products along; tough regulation on both sides of the Atlantic; periodic improper selling techniques in the industry; and the fight for new international markets away from the traditional bedrocks of the US, Japan and western Europe with their ageing populations.

Shire, the Irish/British group that is the latest target in the crosshairs of the Americans, stepped up its defence yesterday against an unwelcome £27 billion takeover approach from AbbVie.

Shire says the terms fundamentally undervalue it. It follows swiftly on from a similarly rejected approach by Pfizer of the US for British/Swiss pharma giant AstraZeneca.

The unapologetic financial engineering behind some of these approaches jumps out immediately. Ian Read, Pfizer’s Scots-born boss, made no bones that a core attraction of taking over AstraZeneca was shifting to Britain’s lower tax regime (Barack Obama must have been thrilled).

Little was said about long-term British research plans. Similarly, AbbVie’s takeover of Shire would involve creating a US listed drugs company with a UK tax domicile.

Earlier this month US medical device maker Medtronic agreed to buy Dublin-based Covidien for £25bn and shift its HQ to Ireland.

There seems little obvious revenue synergies from such M&A action. So we must assume the key rationales are tax benefits and cost savings.

While fund managers in the target companies might rub their hands in glee at the turn of events, it does not allay longer-term concerns for the R&D health of a vital British (and Irish) industry.

It could be grim for taxpayers oop North

NOT content with trying to railroad through one vastly expensive and dubious rail scheme in High Speed 2, George Osborne has a notion for a little brother, HS3.

The latter could apparently run from Manchester to Leeds and help create an economic “Northern Powerhouse”. That, or the mother of all unnecessary Northern corporate conurbations. It looks a vanity project.

It is also no surprise the SNP is angry the project threatens to leave Scotland further in the infrastructure slow lane, which is already the case with HS2.

I doubt that Tokyo, Silicon Valley et al will be quaking at Osborne’s “Top of the world, Ma” routine from atop the Pennines.