Ex-Invesco Perpetual star manager Neil Woodford backs AstraZeneca as an independent business

6th May 2014

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Star fund manager and AstraZeneca investor Neil Woodford believes the UK pharmaceutical group is right to reject Pfizer’s play for the business as it has a “viable and attractive independent future”.

Speaking with specialist trade paper Money Marketing, the former Invesco Perpetual manager who is gearing up for the imminent launch of his new venture, Woodford Investment Management, says he was not surprised that Pfizer is looking to strike a merger deal with the FTSE 100 listed firm because its pipeline “is significantly superior.” But he warned that as a result, this is “a very sensitive time for AstraZeneca”.

Woodford says: “It has got a lot of really important, potentially very profitable, and very beneficial drugs in late stage development. It would be incredibly value destructive if the pipeline progress was interrupted or derailed by some of the integration issues in a bid situation.”

Last week AstraZeneca rejected another offer from the US drugs giant and maker of Viagra. The firm confirmed it had submitted a new proposal, upping its offer to £50 per share, valuing the revamped deal at a massive £63bn.

The bid represented a 39% premium to the closing price of £35.86 on 3 January 2014; the trading day immediately prior to the date of Pfizer’s January proposal.

Presently AstraZeneca represents the top holding within the Woodford run St James’s Place UK Equity and UK High Income funds. It was also the largest holding in the two Invesco Perpetual income funds he previously managed.

In his interview with Money Marketing he says: “I have been a large shareholder in Astra for some years and built the position about the time when the stock was significantly out of favour because I believed in the pipeline, the science and the ability of the business to deliver value.

“It wasn’t the broken business that everybody believed it to be. There is a very, very, viable and attractive independent future for AstraZeneca.”

In a response to Pfizer’s latest advance, AstraZeneca said the terms described in the proposal are inadequate and “substantially undervalue” the business. In a statement, it said: “We are showing strong momentum as an independent company, in particular with our exciting, rapidly progressing pipeline, which the board believes will deliver significant value for shareholders. Pfizer’s proposal would dramatically dilute AstraZeneca shareholders’ exposure to our unique pipeline and would create risks around its delivery. As such, the Board has no hesitation in rejecting the Proposal.”

The proposed merger, which has even seen Pfizer’s chairman and chief executive Ian Read contact the Prime Minister David Cameron, is engulfed in controversy chiefly over fears of potential job losses in the UK, where AstraZeneca employs almost 7,000 people.

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