AstraZeneca is struggling to advance its value defence. The UK pharma group fought Pfizer’s unsolicited $119 billion bid earlier this year by promising growth. It is now reiterating its punchy revenue targets. But Astra is only inching forward. The chances of seeing off another assault by its U.S. rival have been improved more by American curbs on tax-driven M&A than by self-help.
The group’s Nov. 18 investor day would have been a big event if Pfizer was still circling. But the takeover attempt came to a halt in May after Pfizer foolishly ruled out raising its rejected bid or going hostile. Still, the situation left Astra Chief Executive Pascal Soriot on the hook to demonstrate why the group is worth more than the 55 pounds a share Pfizer was dangling.
Soriot made a rod for his own back by promising $45 billion of revenue by 2023. In support of that, the group has beaten its target of getting eight new molecules to late-stage trials or regulatory submissions, hoping to have 14 to 16 submitted to authorities over the next two years. It is also sounding even more optimistic about its Brilinta cardiovascular drug. Astra is sufficiently confident in its oncology franchise to add it to its five existing growth drivers. It is among several firms big in so-called immuno-oncology, a field with industry sales of potentially $35 billion according to Citi analysts.
That is how the bull case has progressed. But the fact remains that over a third of Soriot’s revenue target is to come from diabetes and respiratory. These remain intensely competitive areas, and Astra’s drugs won’t always be the first to market. Morgan Stanley sees Astra’s group sales being just $30 billion in 2023. Mirabaud reckons $32 billion.
If Astra was still fighting for its independence, the investor event would not have proved a decisive turning point. The reality is that Astra’s heavy lifting has been done for it by the U.S. Treasury, which is clamping down on the tax benefits that companies like Pfizer enjoy by buying overseas, making Astra less enticing. At 4,619 pence, Astra shares trade on a punchy 17 times 2015 earnings. Soriot has shown his revenue target was no idle boast. The pressure to deliver remains.