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AZ circles wagons as Pfizer hints at hostile takeover

Aims for annual revenues of $45bn by 2023
AZ circles wagons as Pfizer hints at hostile takeover

AstraZeneca (AZ) has made a vehement case for independence in a strategy document that promises to almost double its annual revenues to $45bn in 2023.

Chief executive Pascal Soriot gave a bullish presentation to investors yesterday as rumours emerged that Pfizer was considering a hostile bid for AZ after having its earlier $106bn offer for the company roundly rebuffed.

By 2017, the company expects revenues to be broadly in line with the $25bn brought in during 2013 but accelerate quickly thereafter as its pipeline delivers a string of new product launches in its core therapeutic areas: oncology; respiratory, inflammation and autoimmune diseases; and cardio-metabolic disorders.

AZ is currently sitting on 11 projects in phase III and another 28 in phase II, including a battery of new cancer drugs, and Soriot said the company now has "the right size, focus and team to deliver on one of the most exciting pipelines in the pharmaceutical industry".

The mid- and late-stage pipeline has the potential to deliver between $23bn and $63bn in peak year sales, said Soriot, with Brilinta (ticagrelor) for acute coronary syndrome (ACS) tipped to become a $3.5bn brand in 2023 and the diabetes portfolio recently acquired from Bristol-Myers Squibb (BMS) adding another $8bn.

The biggest pipeline asset in terms of peak sales potential is anti-PD-L1 candidate MEDI4736 for solid tumours, which is predicted to become a $6.5bn franchise along with combination therapies.

"Our independent strategy will create significant value for patients and our shareholders," he asserted.

It remains to be seen whether investors will be won over by the independence story or seek short-term returns from a Pfizer merger. 

Analyst Savvas Neophytou of Panmure Gordon said: "Management has some convincing to do as most analysts remain sceptical on the achievability of these targets, but at least it sets out the rationale why management turned down Pfizer's advances last week."

He expects Pfizer to have to raise its bid from its current £50 per share to £55 or more if it wants to tempt AZ to the negotiating table.

At the same time, the political aspects of the proposal continue to weigh on the prospects of a deal being consummated, with UK business secretary Vince Cable suggesting that government intervention could be considered if the takeover is not deemed to be in the public interest.

That position comes as Sweden's finance minister Anders Borg warned in a Financial Times article against attaching too much credibility to Pfizer's assurances, given that similar promises were made when the company acquired Swedish drugmaker Pharmacia in 2002 but did not prevent a scale down of operations there to reduce costs.

Whatever its decision on the way forward, Pfizer will have to move quickly given that it has to table a firm offer by May 26. Meanwhile, some analysts have suggested that a hostile bid by Pfizer is unlikely, given that one of the key benefits for a merger would be to get access to the UK's favourable corporation tax rate which, at less than 20 per cent, is several points lighter than in the US.

Article by
Phil Taylor

7th May 2014

From: Research, Sales



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