AstraZeneca boss defends strategy as analysts say sales could fetch $15bn

For Sale

AstraZeneca boss Pascal Soriot fired a warning shot across the bows of bigger US rival Pfizer, a potential suitor, as he insisted that the British drugmaker's strategy was working and highlighted progress with new cancer drugs.

He also indicated that non-core units could be spun off or sold, which analysts said could fetch up to $15bn (£8.9bn).

Britain's second-biggest pharmaceutical company is said to have received a tentative £60bn bid from Pfizer, the world's largest drugmaker. While Soriot did not comment directly on the bid, he said that "large mergers and acquisitions sometimes can work but often are very disruptive." He lauded the multibillion-dollar asset swap unveiled by GlaxoSmithKline and Switzerland's Novartis on Tuesday as a "win-win for both companies," adding: "It is certainly the kind of thing we ourselves are considering."

The future of AstraZeneca's antibiotics and neuroscience divisions is under review. "What you are likely to see from us is a continued focus on what we do well … We can't do everything ourselves. There are a variety of options open to us which were studying right now," Soriot said.

AstraZeneca shares rose 5% to £42.62.

The drugmaker is moving four important products into late-stage clinical testing, two for cancer and two for breathing disorders, including the first of its closely watched immunotherapy cancer treatments (which boost the immune system to fight tumours).

AstraZeneca's cancer pipeline is seen as the main draw for Pfizer. Citigroup analyst Andrew Baum has said a Pfizer bid made sense and there could be a second approach. The UK company could seek a merger of equals as a defence – with US firms AbbVie or Amgen (with which it has an R&D collaboration). Other analysts were sceptical about the merits of a Pfizer-AstraZeneca tie-up, which would be the biggest pharmaceutical deal ever.

Under Soriot's leadership, AstraZeneca is focusing on three areas – cancer; respiratory and inflammatory; and cardio-vascular and diabetes medicines. The company is looking for partnerships elsewhere, for example for its experimental Alzheimer's treatment. Data from early clinical trials "look very encouraging", Soriot said, and the drug will be fast-tracked into late-stage trials this year.

Panmure Gordon analyst Savvas Neophytou said infection and neuroscience (already a "virtual" unit which relies on external collaborations) with combined revenues of $3.7bn could bring in $15bn at a 4x multiple of sales, "which could be a nice fillip". He thought Abbvie would be interested in the infection unit, whose portfolio includes lung drug Synagis, to which the Chicago drugmaker holds the European rights.

Soriot stressed the company's commitment to the UK. It is relocating its global headquarters from London to Cambridge by 2016 to be closer to academic researchers, with some of its 1,500 scientists from Alderley Park in Cheshire moving there this year. He highlighted that its AZD9291 lung cancer treatment, which has received breakthrough therapy designation in the US, had been discovered by scientists in the UK.

Sales in the first quarter rose 3% to $6.42bn at constant exchange rates – the first quarterly sales growth in over three years – with revenues in China surging 22%. But pre-tax profits fell 18% to $1.82bn, and by 13% at constant exchange rates, during the period. AstraZeneca still expects a low-to-mid single digit percentage decline in 2014 sales, with earnings falling "in the teens" as competition from cheap generic medicines will hurt sales of its top-selling heartburn pill Nexium in the US from the end of May.

Mick Cooper, analyst at Edison Investment Research, said: "These numbers highlight why the interest [from Pfizer] is there. AstraZeneca has been in transition, with much business and product development under way but little as yet is really visible.

"We think AstraZeneca will return to growth faster than many believe, which underlines Pfizer's opportune timing."

Powered by Guardian.co.ukThis article was written by Julia Kollewe, for theguardian.com on Thursday 24th April 2014 13.54 Europe/London

guardian.co.uk © Guardian News and Media Limited 2010

 

JefferiesAnd the Best Place to Work in the global financial markets 2016 is...

Register for Financial Markets News Alerts