Astra Zeneca is not the National Trust. It’s a commercial organisation with billions of pounds of other people’s money at its disposal. The directors are playing up the value of research and development for all they’re worth, but the plain truth is that Astra really isn’t very good at it. Like most big drug companies, it’s good at exploiting promising compounds, getting them to market efficiently, and finding ways of extending the patents which produce the profits.

These skills are valuable, since the patent clock ticks fast, and complying with local rules on use of the drugs is essential. To exploit a treatment fully before the generics arrive to undercut the price requires the sort of reach and organisation that only a substantial multi-national company can sustain. For all the bluster about their research, these marketing skills are the big companies’ core competence.

Last week, in its first response to the Pfizer approach, Astra rather let the cat out of the research bag. Of the seven “mid-stage pipeline assets” which it said hold the key to its prosperity a decade hence, six were developed by companies which Astra itself had bought. All six further compounds showing “attractive optionality” were developed by others.

Astra’s in-house research may indeed be better than Pfizer’s – which is generally thought to have the worst recond of any major group – but it’s nothing to shout about. Measuring the wealth that a drug can produce over its lifetime is difficult, but both companies have spent tens of billions of pounds for diminishing returns.

Pfizer is proposing to pay two-thirds more than nearly all the City’s analysts thought Astra was worth six months ago. The harder question for the shareholders is not whether this modestly-increased bid is enough, but whether Pfizer paper is worth keeping. The 5 per cent fall in the price since the approach betrays the market’s doubts. The swift rejection of the raised offer is likely to infuriate Astra shareholders, who must either strong-arm the directors into changing their minds, or hope that all that drugs-in-the-sky hopes come to pass. It may be a very long time before the share price passes Pfizer’s offer.

As for the march of medical science, the overwhelming evidence is that smaller, more entrepreneurial businesses are better at research: measured in terms of successful drugs per dollar, there is no contest. Should Pfizer win Astra there will be wailing, gnashing of teeth and redundancies among the scientists in both companies. But many, perhaps most, of them will quickly find work in the next generation of R&D businesses, where their talents will be far more efficiently deployed. Just don’t expect any of the politicians to admit as much.

AO world of its own

The share price of AO World, on-line purveyors of fridges and washing machines, is looking a little better. It’s had a torrid time in the tumble dryer since flotation in February at 285p a share. So many investors thought that price absurdly low that it shot to 378p on its first day, followed by cries of foul play from some of the 300 institutions that failed to get stock.

Well, they could have all they want today, at the mid-season sale price of  245p. Perhaps they are not rushing because AO is still valued at £1bn, or nearly four times sales in the year to March. Profits? Don’t ask. This is an internet retailer, after all.

Shares in fuddy-duddy old Dixons Retail sell on less than 0.3 times sales, and the response to the well-flagged merger with Carphone Warehouse was 10 per cent off the share price. It’s not obvious that AO can really do anything that CarDix (or whatever) can’t, and AO’s price plunge might have been even worse without US-based Baron Capital, which has popped up as a 5 per cent shareholder. It claims to be a long-term investor in stocks with “substantial competitive advantages and barriers to entry”. Ah, that’s it: AO is obviously the next Amazon.

Irish decimal points

There are 523,438,445,437 Allied Irish Banks shares in issue. The (ESM) price is E0.1, which values the bank at E52bn. The Irish government owns 99.8 per cent of the equity. In its (relatively) cheerful trading update this week the board felt moved to add: “AIB trades on a valuation multiple of 8x 31 December 2013 net asset value. The bank notes that the median for comparable European banks is c.1x NAV.”

This is an updated version of my FT column