As battle over AstraZeneca looms, one lab in Slough shows mergers can work

If Pfizer executives want to know how to pull off the acquisition of a British drug maker, they should visit a nondescript 1980s office block in Slough.

It would be a worthwhile visit for the US drugs firm, which is allowed to resurrect its £69bn interest in UK rival AstraZeneca after an embargo imposed by the Takeover Panel expired last week. The Slough building houses a laboratory once operated by Celltech, formerly the UK's largest biotechnology firm and now a unit of UCB, a Belgian family firm best known for its Zyrtec anti-hayfever pill. It is proof that a foreign pharmaceuticals business can launch a raid on these shores and avoid the political and public scorn that squashed the AstraZeneca bid.

Ten years ago, UCB achieved Pfizer's ambition of acquiring a British industrial champion, which sparked the usual fears over job losses. Hailed by Tony Blair as one of the "giants of British biotechnology", Celltech, founded in 1980, disappeared from the public market.

A key reason why New York-based Pfizer failed in its attempt to take over AstraZeneca in May was that it underestimated the furore over the likely loss of thousands of research jobs and the knock-on effects on British science. Under Takeover Panel rules, it could return with a higher offer if it is invited back to the negotiating table by AstraZeneca after a 90-day waiting period expired last week. However, Astra's opposition to a deal makes that unlikely – even if Pfizer is allowed to make a phone call to AstraZeneca to make a single offer and the shares have risen nearly 12% in the past fortnight on speculation of a new bid.

So investors will pay closer attention in late November, when an embargo on any new bids from Pfizer is lifted entirely and the US group is allowed to make a public, even hostile, approach.

Today the former Celltech lab in Slough boasts a brand new suite of automated equipment, including a 20kg robot that has halved the time it takes to screen antibodies. Medicines based on antibodies, which are produced by the body's immune system to fight infection, now see the fastest growth in pharmaceuticals sales.

Following the £1.5bn acquisition of the FTSE 100 company, UCB kept the lab open – it now houses about 400 scientists – and made it its global centre for research and development (R&D). It is focused on immunology drugs, which use the body's immune system to tackle illness.

The company, owned by Belgium's Janssen family, prides itself on being one of the biggest foreign investors in UK life sciences, having ploughed £1.2bn into research in the UK over the last decade. It recently spent $5.5m (£3.3m) on upgrading its antibody discovery equipment in Slough, including the new robot. Similar to the ones used on a car assembly line, it has been scaled up to handle plates with cell cultures, halving screening time to two to three months. This is where Cimzia – Celltech's leading product – was developed: a synthetic antibody that treats rheumatoid arthritis and Crohn's disease.

Pfizer, incidentally, played a role in ending Celltech's independence: by pulling out of a partnership agreement to develop the drug, it drove Celltech into the arms of its bigger suitor in 2004.

The reaction to the takeover was relatively muted, even though it crushed hopes that Celltech would emulate the success of America's Amgen and Genentech (the latter was bought by Roche but kept as an autonomous division which has outshone its Swiss parent).

Paul Cuddon, healthcare and life sciences analyst at Peel Hunt, says: "Biopharmaceutical success stories in the UK have been so rare that when companies do well, their shareholders have often needed to take profits – namely Celltech, Acambis, ProStrakan. Our best and brightest companies often get sold off prematurely."

Cuddon adds that AstraZeneca's victory in its battle to stay independent, as well as the recent stock-market fundraisings by a host of small British biotech firms – BTG, Circassia, Vectura, SkyePharma and Horizon Discovery – suggest that "the UK market is coming round to funding Britain's best companies for longer".

But a sense of siege prevails. AstraZeneca is not out of the woods yet and another FTSE 100 company – Shire, founded in Basingstoke in 1986 and known for its anti-hyperactivity drugs – has just succumbed to a £32bn takeover by Chicago-based Abbvie. The battle was far less emotive because Shire had already moved its HQ to Dublin for tax reasons, shifted its R&D to the US and was only employing 500 people in the UK.

UCB, for its part, shied away from the "slash and burn" approach adopted by other big players in the industry. Pfizer laid off thousands of people after each of its past acquisitions and shut the bulk of its lab in Sandwich, Kent three years ago, leading to more than 1,500 job losses.

When UK vaccine maker Acambis was sold to its longstanding collaborator, France's Sanofi, in 2008 for £276m, Sanofi sold its Cambridge site. In 2012 Sanofi closed Genzyme's lab in Cambridge with the loss of 60 jobs after acquiring the US biotech firm for $20bn, leaving the French company with no R&D jobs in the UK.

While UCB shut Celltech's smaller Cambridge lab, some scientists transferred to Slough, and in the following years the company hired more. At the time of the acquisition, Celltech employed 470 people in Britain; today UCB employs 700 people (mainly scientists) in the UK and Ireland.

UCB's treatment romosozumab for post-menopausal osteoporosis, which is in late-stage clinical trials, was developed in Slough, after a rare gene that creates bone was discovered in a small Afrikaans population in South Africa. UCB recently used crowdsourcing to find people with unusal genetic make-up that could form the basis of new medicines, and will follow up with people who have a congenital insensitivity to pain and others who heal quickly.

Another shining example is the £292m acquisition of Scottish biotech firm ProStrakan by Japan's Kyowa Hakko Kirin (KHK) in 2011. Since then, the Borders-based firm has seen revenues and profits soar and staff numbers in Galashiels rise by 50% to 110 people.

A decade ago, American conglomerate General Electric bought UK medical diagnostics firm Amersham and combined it with its medical systems arm to form GE Healthcare, still based in Buckinghamshire – the first GE business to be headquartered outside the US. The $18bn company provides technology and services to the NHS and employs 2,700 people in the UK, about a third of whom work in R&D.

UCB's chief executive Roch Doliveux, who steps down in January 2015 after 10 years at the helm, is sceptical about big mergers. "We are an industry where innovation and size do not go well together," he says. "Large companies are not more productive; in fact large companies are less productive. The key is stay small and focus."

Pfizer admitted that a takeover of AstraZeneca would lead to big cuts in the R&D budget and the number of scientists employed by the merged company. Its pledge to keep 20% of the combined workforce in Britain for five years was not enough for Astra and the UK government. As Mike Ingram of BGC Partners puts it: "Twenty per cent of nothing is still nothing."

If Pfizer wants to have another tilt at AstraZeneca, it needs to come up with better guarantees – especially if UK business secretary Vince Cable makes good on his promise to introduce multimillion-pound penalties for foreign firms that break commitments.