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Pfizer U.S. research jobs jeopardized by promises to UK for merger

By Ransdell Pierson and Bill Berkrot

NEW YORK (Reuters) - Employees at Pfizer Inc's U.S. research centers, such as the La Jolla, California site that specializes in cancer drugs, may want to dust off their resumes if the company's proposed acquisition of Britain's AstraZeneca comes to fruition.

Pfizer said on Friday it was determined to reach a deal that would restore its status as the world's biggest pharmaceutical company despite AstraZeneca's rejection of its latest cash and stock offer of 63 billion pounds ($106 billion).

To reassure the British government about its proposal, Pfizer has promised the combined company would keep 20 percent of its research and development workforce in the country. It also vowed to complete construction of a research center planned by AstraZeneca in Cambridge, England, and retain a manufacturing plant in the northern town of Macclesfield.

"There's no doubt in my mind that if they are making these concessions to the British government, there will be cuts on this side of the Atlantic," said Raghuram Selvaraju, healthcare equity research analyst with Aegis Capital.

Cost savings through large numbers of job cuts, typically described by companies as "synergies," are a key component of any big merger deal. A Pfizer deal for AstraZeneca would be no different.

Since the deal would give Pfizer control of AstraZeneca's extensive and promising portfolio of oncology drugs in development, Pfizer's own cancer and vaccine research center on the Pacific coast near San Diego could face the chopping block.

"If I was a Pfizer R&D employee in the U.S. and this merger goes through, I would be very fearful of my job, especially if I was based in La Jolla," Selvaraju said.

"Pfizer has a history of shutting down facilities; they don't thin down head count; they shut down an entire facility and pick up their stakes and move away."

Pfizer declined to comment on where any job cuts might come from. The company would not disclose how many people work at the La Jolla facilities or other U.S. research centers.

Pfizer's 25-acre La Jolla campus includes five buildings totaling more than 500,000 square feet, with specialized laboratories and equipment.

John LaMattina, Pfizer's research chief from 2004 to 2007 and currently a senior partner at PureTech Ventures in Boston, agreed that the La Jolla cancer research jobs as well as neuroscience researchers in Cambridge, Massachusetts, were likely in jeopardy. He said Pfizer could also fold its U.S.-based immunology and respiratory research into existing AstraZeneca operations in Britain.

"If I was in any of these places, I'd worry about this deal going through," said LaMattina, noting that three oncology research sites that existed when he was in charge were later consolidated into the one California site.

Pfizer spent $6.68 billion on research and development in 2013, down from an R&D budget of $7.48 billion in 2012. At its height following the 2009 acquisition of Wyeth, R&D expenses were about $11 billion.

With Pfizer's promise to protect the UK research, jobs at AstraZeneca's oncology and neuroscience research centers near Boston and its MedImmune cancer research and development operation in Gaithersburg, Maryland, could also come under the cost-cutting knife.

Selvaraju said wholesale job cuts in the United States appeared likely because workers here have less protection than in Europe. "It's easier to let people go," he said, noting employers don't have to give much severance or that much notice.

Leerink Partners analyst Seamus Fernandez agreed that a significant portion of the synergies "will come from the substantial overlaps in the U.S." He also predicted some cuts would come from duplications in emerging markets and in Germany.

"This deal makes a lot of sense from a business standpoint," LaMattina said. "But for R&D it stinks."

(Editing by Frank McGurty and David Gregorio)

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