In late November 2023 AstraZeneca’s chief executive Pascal Soriot flew from Sydney to London to deliver a tantalising political gift on a day that the company had privately branded “Super Tuesday”.
After touching down, he held back-to-back meetings with then-UK Prime Minister Rishi Sunak, chancellor Jeremy Hunt and science and tech secretary Michelle Donelan, according to people briefed on the matter.
For a British political class starved of economic good news, Soriot’s proposal brought some rare cheer: a major expansion of AstraZeneca’s vaccine plant in Speke, near Liverpool, that would bolster Britain’s claim to be a leading centre for life sciences.
“Pascal was this big superstar CEO, AstraZeneca has been a rocket ship under his leadership. We rolled out the red carpet for him,” said a person involved in the government meetings. “It was all smiles, all hand shakes.”
But 14 months later, AstraZeneca has dramatically axed the Speke project. It told officials about the decision last week just hours after current Labour chancellor Rachel Reeves named AstraZeneca as one of Britain’s “great companies” in a growth speech.
Recriminations flew, but how did it all go so wrong?
At those November 2023 meetings, Soriot touted his plan to build on AstraZeneca’s vaccine manufacturing facilities in Speke, which produce the company’s highly successful nasal flu vaccine, and his desire to make next-generation vaccines in Britain.
Soriot mentioned that AstraZeneca — Britain’s largest listed company with a £180bn market capitalisation — had recently opened up manufacturing facilities in Spain and Germany, touching on an “open wound” for the then-Conservative government, according to a person briefed on the discussions.
A few weeks later, Donelan was invited to visit AstraZeneca’s research and development site in Cambridge, the heartland of Britain’s life sciences sector, where she was treated to a glitzy tour of their state of the art research facility.
Shortly afterwards, representatives from AstraZeneca set out details of their request for government support: they wanted £100mn in grants to help develop the site.
“The Office for Life Sciences saw it as a major coup if they could guarantee AstraZeneca’s presence in the UK. They were willing to pull every lever at their disposal to make it happen,” said one government official from the time. “It was also one of the few policy areas where the civil service, ministers, everyone was in sixth gear.”
When news of the deal that was being drawn up leaked to the Financial Times on January 24 last year, Soriot called Hunt personally to voice his deep frustration, according to a person briefed on the discussion. The matter was smoothed over and Hunt intervened to get a final offer of £90mn in government support over the line. Soriot worked to persuade his board.
“I had to over-rule Treasury concerns about value for money and Pascal Soriot had to over-rule his board who thought it wasn’t enough,” Hunt told the FT. “But it was the right thing because it was so strategic for the UK and a lot of the value chain for high-end medicines and vaccines is in manufacturing and not just research.” A person close to Soriot said he would not have been able to “over-rule” the board.
Soon the relationship frayed. In early March, England’s National Institute for Health and Care Excellence (Nice) rejected AstraZeneca’s breast cancer drug Enhertu arguing that the price was too high. Other countries — even Scotland — were offering the drug, which oncologists had heralded as a breakthrough. The decision angered executives and board members at the company, intensifying wider frustrations about the UK government’s aggressive negotiations on drug pricing.
Soriot said on Thursday, as AstraZeneca unveiled better than expected fourth-quarter earnings, there was “zero link” between Nice’s decision on Enhertu and the Speke negotiations. He added that the country’s drug pricing clawback tax did discourage investment, but again said this was “absolutely separate from Speke”.
The day after Nice’s rejection, Hunt announced AstraZeneca’s investment in a £450mn facility in Speke as he unveiled his March Budget — outlining vague commitments that the pharmaceutical company would develop its next generation of vaccines at the site, and help the UK prepare for future pandemics.
Two months later, Sunak called a general election and the government entered campaign mode, leaving the deal and a pending AstraZeneca grant application hanging in limbo.
Sir Keir Starmer and his ministers arrived in government after Labour’s landslide victory on July 4 expecting to find full details of the proposed AstraZeneca deal agreed with Hunt. But four senior government figures told the FT that they could not find due diligence paperwork to back up the subsidy.
“When we got in, we realised that the deal announced by Hunt had been done without any value-for-money work alongside it,” one official said.
Hunt said this was “nonsense”, adding that he had “never heard of due diligence for a public sector deal before” as terms are agreed upfront.
One official recalled asking AstraZeneca for a letter outlining the terms of the deal and being shown two text messages: one offering AstraZeneca the £90mn, and a second outlining the government’s plan to announce it.
The person added that senior figures in AstraZeneca “kept raising that their breast cancer drug had been turned down by Nice”.
The new government set about doing their own due diligence, against a backdrop of Reeves looking for savings to fill what she claimed was a “£22bn black hole” in the public finances.
AstraZeneca saw this as kiboshing a deal they had already made. “The reality is they reopened the deal and that is where all the problems arose,” said the person close to Soriot.
Shaun Grady — now AstraZeneca’s UK chair — wrote to the new government in July saying it was “crucial” the company received assurances about the Speke project in order to start work in August, according to correspondence obtained by The Times.
Negotiations between AstraZeneca and Labour continued through the summer of 2024, as due diligence revealed to ministers that the company was going to invest £90mn in research and development related to the site, lower than a previously touted figure of £150mn.
One industry figure briefed on the negotiations said the company saw this as government “bean counters” failing to see the “big picture”.
“Treasury officials want due process and do it the old-fashioned way . . . But that’s different to how other governments have been doing it,” they said, pointing to deals that AstraZeneca has made with Canada and Singapore, among others.
In August, representatives from AstraZeneca were called into government and told they would only be offered £40mn in government grants. The government’s contribution was based on a pro rata match of what the company was itself putting in, officials said.
Senior figures from AstraZeneca had a “hissy fit”, one official recollected of the discussions. In conversations with government figures, representatives from AstraZeneca said the company could relocate its vaccine manufacturing facility to Philadelphia, another site where it manufactures the nasal flu vaccine, according to people briefed on the discussions.
An alarmed Reeves and Peter Kyle, the science secretary, ordered officials to cobble together a revised package to try to save the project.
In October, the Treasury put £78mn on the table. Though less than the £90mn offered by Hunt, government officials felt the “mood music” seemed to improve. “The company accepted we put our best foot forward,” said one.
AstraZeneca took the offer away to consider. An ominous silence descended on the project.
In November, AstraZeneca failed again to get Enhertu approved by Nice. The following month, the company and other pharmaceutical groups discovered the NHS was demanding they return a higher proportion of their drugs sales under a clawback mechanism that caps the state health service’s costs, leading to anger across the sector. Executives were also reeling across the British business world from a £25bn national insurance contribution hit in Reeves’ Budget.
Drugmakers met health secretary Wes Streeting in January to complain about the clawback tax, arguing it made Britain deeply uncompetitive and asking him to reconsider the rate later in the year. Streeting has so far not ceded to this demand.
Last Wednesday, Reeves touted the UK as a place for companies to invest and name-checked AstraZeneca as one of Britain’s “great companies”.
A few hours later, members of her department met online with senior figures at AstraZeneca and were told their offer for the Speke project had been refused. Officials were taken aback. The deal was dead. Two days later AstraZeneca told the FT it had ditched the project in part because of “the timing and reduction of the final offer compared to the previous government’s proposal”.
Some figures on both sides of the negotiations have questioned how committed AstraZeneca was to building the site in the first place, given the company primarily invests in other medicines, such as oncology drugs.
“Vaccines is off strategy for AstraZeneca, not at all their future focus,” said one person close to the company, adding it wants to focus R&D in Cambridge or on the east coast of the US.
One official said the episode had echoes of AstraZeneca’s decision to close a research facility at Alderley Park — about an hour’s drive east of Speke — in 2013, moving the R&D out of north-west England and down to Cambridge.
The Treasury said “due to a change in the terms originally agreed, we could not justify offering the same amount of funding”. AstraZeneca declined to comment.
Soriot said on Thursday AstraZeneca had been committed to the Speke project, and at one point had even increased its offer to £500mn of investment.
But he said the deal had become “economically unviable” and the company was looking at alternative proposals for where to expand.
“There was no tension, no issue, very very good collaboration with everyone involved,” he said. “We’re all very disappointed but that’s business life.”
