The AstraZeneca boss Pascal Soriot has hinted that another takeover approach from its US rival Pfizer has become less likely after a US clampdown on tax inversions, as the British drugmaker upped its 2014 sales and profit forecasts for the second time this year.
The company, which fought off a £70bn bid from Pfizer in May, shored up its defences in the battle to stay independent with better-than-expected results in the third quarter. Revenues climbed 5% to $6.5bn, marking the third consecutive quarter of sales growth after years of decline.
This prompted AstraZeneca to upgrade its annual guidance again: it now expects revenues to rise in low single digits this year, having previously expected a flat outcome. This would be the first time annual revenues have risen since 2011.
Core earnings per share in 2014 are falling by 10%, as AstraZeneca is investing heavily in research and development.
The Viagra maker Pfizer wanted to use the acquisition of AstraZeneca to shift its tax base to Britain, a move known as tax inversion.
Soriot said the recent tightening of US tax rules to discourage inversion deals “almost entirely removed the tax benefits and makes tax inversions much less attractive”. The subsequent collapse of AbbVie’s planned £34bn takeover of the FTSE 100 firm Shire – the biggest to be scuttled by the White House’s clampdown on inversions – showed that the “tax inversion risk, quite frankly, has become a reality”, he said. “[Pfizer] have to do their own assessment of the consequences of this change.”
AstraZeneca will brief shareholders in detail on its strategy on 18 November, just eight days before Pfizer can come back with a fresh bid after a six-month cooling-off period expires. Pfizer’s decision to start a $11bn share buyback programme has been interpreted as making another approach more unlikely.
Ketan Patel, senior investment analyst at Ecclesiastical Investment Management, which holds AstraZeneca shares in several portfolios, said: “The shift in R&D strategy from volume-driven to science-driven looks set to deliver growth in 2017 and beyond for the company, although the speculation on Pfizer returning to make another bid will continue in the background.”
More than half of third-quarter revenues came from AstraZeneca’s five key areas: its new heart drug Brilinta, its diabetes portfolio, respiratory medicines, emerging markets, and Japan.
Britain’s second-biggest pharmaceutical firm benefited from delays to the arrival of generic copies of its big-selling heartburn pill Nexium in the US. This hit will come next year, followed by another major hit in 2016 when AstraZeneca’s US patent expires on Crestor, its cholesterol-lowering blockbuster medicine.
Mick Cooper, analyst at Edison Investment Research, said: “The results are flattered slightly by the acquisition of Bristol-Myers Squibb’s share of the diabetes alliance earlier in the year. That said, the increased investment in sales and marketing appears to be paying off with good growth across its cardiovascular (including Brilinta) and respiratory product portfolios.”
Soriot said the flurry of deal making would slow as the company now had a strong pipeline of new medicines. This week it strengthened its cancer portfolio with three deals, including the acquisition of Definiens, which has developed imaging and data analysis technology for cancer tissue samples.
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