AstraZeneca Plc (AZN) got a boost from a long-time shareholder and one of its biggest institutional stockholders after other investors criticized the drugmaker for spurning Pfizer Inc.’s (PFE) 69-billion-pound ($117 billion) takeover offer.
Neil Woodford, who until last year managed one of the biggest stock funds in the U.K. for Invesco Ltd. and now runs his own firm, said AstraZeneca will earn better returns for shareholders by staying independent. Woodford praised Chief Executive Officer Pascal Soriot for reviving the London-based company’s drug research operation. Fidelity Worldwide Investment said Pfizer isn’t a “suitable partner” for AstraZeneca.
The comments may help AstraZeneca’s board withstand complaints from Axa Investment Managers and Schroder Investment Management Ltd. that the company should have negotiated with Pfizer. The stock slid 11 percent May 19 after AstraZeneca’s rejection, raising the prospect that investor pressure may push the drugmaker to reverse course and begin talks. Traders who speculate on mergers and others who wanted a deal sold, Woodford said.
“I am, however, relieved that AstraZeneca appears to have retained its independence,” Woodford, who runs Woodford Investment Management, said by e-mail. “I applaud the board’s resolute resistance of the Pfizer approach, based on their long-term value judgment that I fully support.”
AstraZeneca rose as much as 2.3 percent today and was trading up 1.8 percent to 43.86 pounds at 1:23 p.m. in London after a gain of 0.5 percent yesterday. New York-based Pfizer said the 55-pound-a-share offer was final and can’t be raised under U.K. law.
Woodford, 54, managed about 33 billion pounds when he left Invesco last month. He built a reputation in England for outperforming rivals by buying shares of the country’s biggest dividend-paying companies, including drugmakers AstraZeneca and GlaxoSmithKline Plc. At the same time, he devoted a chunk of his assets to funding early-stage health companies in the U.K. at a time when other investors shunned them as too risky.
Under Soriot, AstraZeneca’s portfolio of experimental drugs in late-stage research “has been transformed from one of the poorest in the industry to arguably the best,” said Woodford, who’s still setting up his own fund but has 350 million pounds invested in AstraZeneca in funds he manages for St. James’s Place Plc.
Pfizer was motivated by tax and finance considerations, said Dominic Rossi, Fidelity Worldwide’s London-based global chief investment officer for equities. The firm, which manages about $275 billion and is independent from Boston-based Fidelity Management and Research Corp., is AstraZeneca’s 18th-biggest shareholder.
Threadneedle Asset Management, the 16th biggest shareholder, also backs the decision.
“As long-term shareholders, we continue to be supportive of the AstraZeneca board,” said Iain Richards, head of governance and responsible investment at Threadneedle.
While Legal & General Investment Management has “talked to both sides,” it won’t comment further amid a potential transaction, CEO Mark Zinkula said at an annual meeting in London today. Legal & General is AstraZeneca’s seventh-largest investor.
“Our aim is to maximize shareholder value,” Zinkula said.
Still, investment managers may keep the pressure on Soriot to rethink his position toward Pfizer, given that AstraZeneca is forecasting falling sales before some of the company’s experimental products reach the market. There’s also the risk that many of those compounds fail in clinical trials.
“As long-term shareholders, we are strong believers in AstraZeneca and the potential for its innovative growth pipeline,” Schroders said in a statement yesterday. “However, given the increase in the offer, we would encourage the AstraZeneca management to recommence their engagement with Pfizer, and subsequently their shareholders.”
Alastair Gunn, co-manager of Jupiter Distribution Fund and Jupiter High Income Fund, said AstraZeneca shouldn’t have rejected the offer so categorically.
“They should have at least engaged in a constructive conversation with Pfizer on the details of the offer to assess the opportunities that a combined entity could bring,” Gunn said in an e-mail May 19.
Axa’s Richard Marwood said in a statement that the board wasn’t “necessarily acting in shareholders’ best interests.”
AstraZeneca said it’s taking investors’ views into account.
“Shareholders have different investment themes, different investment horizons; they are very multifaceted group of people,” Chairman Leif Johansson said in an interview with Bloomberg Television. “Some are bound to be unhappy with short-term movements of the stock right now, others thinks it’s a good thing we’re in standalone mode and we could deliver good value for them down the road.”
If the deal really is dead, Soriot and the board now will have to prove they did the right thing.
“We will now have to wait two to three years to see whether they were right,” Fidelity Worldwide’s Rossi said.
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