As the deal turns: With the Pfizer-AstraZeneca soap opera canceled, time for second-guessing

Pfizer CEO Ian Read

Pfizer's run at AstraZeneca is officially at an end. No more will-they-or-won't-they speculation, for at least a few months. What we're hearing now is a story of pride, prejudice, poor timing and miscalculation. CEOs and company boards are people, too, after all.

AstraZeneca Chairman Leif Johansson

To hear deal insiders talk about the behind-the-scenes machinations, Pfizer ($PFE) might have clinched a deal if CEO Ian Read hadn't chosen a conference call over a face-to-face meeting in London after upping his offer to £53.50 on May 16. According to Bloomberg sources, AstraZeneca ($AZN) Chairman Leif Johansson called Read the next day to invite him back to London to chat about the new offer.

But Read had been stung by the Parliamentary hearings earlier in the week, when British politicians pounced. They had questioned Pfizer's postbuyout promises--too vague, too brief, too contingent--and its history of megamergers and mega-job cuts. They'd called Pfizer a blood-sucking praying mantis, a shark on a perpetual feeding binge, even a "rapist." U.S. lawmakers, meanwhile, were up in arms over Pfizer's tax-avoidance strategies, and Swedish leaders were lamenting potential job cuts in their country, too.

AstraZeneca CEO Pascal Soriot

It didn't help that AstraZeneca CEO Pascal Soriot painted Pfizer as a Big Bad Wolf character that would swallow up his company's most promising, lifesaving drugs. Read had to go on the defensive after those comments, and his contention that Pfizer would get those drugs to market, and more quickly than AstraZeneca could, fell a bit flat.

A judge might call the flying accusations prejudicial. What's certain, according to Bloomberg, is that Read didn't want to jet over to London only to be rebuffed by AstraZeneca again. Too humiliating. So, he suggested a conference call instead.

That didn't play well in London, the news service's sources say. AstraZeneca board members saw it as a sign that Pfizer wasn't committed to reaching an agreement. When they gathered May 17, they voted to reject that £53.50 offer.

Pfizer's next misstep? The company publicly rolled out a "final" offer of £55 per share, without running it by AstraZeneca execs. Johannson has said AstraZeneca's leadership was surprised by that choice--and not in a good way. The Pfizer camp tells Bloomberg that the company tried to reach AstraZeneca before publishing its offer. At least one source contends that Pfizerites figured the deal was already dead. In any case, the unexpected offer didn't work, as Reuters points out; the bid didn't shame AstraZeneca's board into coming to the table. Nor did it touch off a full-fledged investor rebellion as Read might have hoped.

Now, it's official: Both Pfizer and AstraZeneca have issued their press releases. Pfizer says its bid was "compelling" and "represented full value" for AstraZeneca. Johansson says AstraZeneca is pleased to move on as an independent company, to continue pursuing its goals. Both sides have some explaining to do; Pfizer will have to show how it plans to grow sales and improve margins as its drugs continue to lose patent protection--and without the tax breaks and cost-cutting aid an AZ deal would have offered. AstraZeneca has some very ambitious sales targets to hit, thanks to the dog-and-pony show Soriot and Johansson put on for investors in defense of its Pfizer rejection.

Plenty of people expect the potential deal to resurface. Under U.K. takeover law, if AstraZeneca investors press hard enough, the company could find itself compelled to invite Pfizer to the table in August. Or, Pfizer could come back with an offer in November. But according to one of Reuters' sources close to AstraZeneca, the ideal time for making a deal has already passed. If Pfizer had made a bid last November, when it first approached AstraZeneca about a deal--or if it had tried harder in January, when its interest revived--it might have succeeded, because back then, Soriot and Johansson hadn't yet made much of a case for AstraZeneca's promising future.

- see the AstraZeneca release
- check out Pfizer's statement
- read the Bloomberg story
- get more from Reuters

Special Reports: Top 10 pharma companies by 2013 revenue - Pfizer - AstraZeneca