AstraZeneca Boasts of Pipeline as Analysts See Deal Ahead

AstraZeneca Plc, the U.K.’s second-biggest drugmaker, is advancing experimental drugs into late-stage clinical trials faster than expected in a bid to replace sales that it’s losing to generic competitors.

Three medicines that may move into final-stage development this year have potential for peak annual sales of at least $1 billion, the London-based company said yesterday. One of those is an Alzheimer’s drug called AZD3293 that’s in early-stage testing, meaning it could skip the middle stage of human trials.

“Looking back over the last 12 months it’s clear that we have made real progress in this area,” Chief Executive Officer Pascal Soriot said on a conference call with reporters after the company announced fourth-quarter earnings. “We’re building momentum but there is still a lot of work ahead of us.”

AstraZeneca’s optimism about its pipeline is meeting with skepticism from some analysts, who say the company may still need to do a big acquisition to return to growth. The company last month forecast that revenue in 2017 will be similar to last year’s, as patents expire on the heartburn pill Nexium and cholesterol treatment Crestor.

AstraZeneca has 11 drugs in late-stage clinical trials and potentially 19 more product candidates in such studies by the end of next year, the company said.

Some of the drugs in development now may fail in trials, said Fabian Wenner, an analyst with Kepler Cheuvreux in Zurich. “After 2018 the picture changes but who knows what will be left?” he said in a phone interview. “We have to see the data first.”

‘Rebuilding Approach’

Under previous CEO David Brennan, AstraZeneca shunned big acquisitions, preferring to develop drugs on its own or do smaller licensing deals. Soriot, who became chief executive in October 2012, repeated yesterday that the company wouldn’t rule out a big purchase if the opportunity arises.

Such a deal may be necessary, Tim Anderson, an analyst with Sanford C. Bernstein & Co., said in a report.

A larger acquisition “could suddenly change the outlook” for the company while small acquisitions “will represent a slower, brick-by-brick rebuilding approach,” Anderson wrote.

The Alzheimer’s treatment AstraZeneca touted yesterday is part of a novel class of drugs called BACE inhibitors that block production of amyloid, a protein that causes plaques to build up in the brain of Alzheimer’s patients.

“It’s a hidden gem,” Soriot said in an interview yesterday.

Kidney Disease

Two in this class, from Roche Holding AG and Eli Lilly & Co., failed in development because of safety issues. AstraZeneca may seek a partner for the drug after deciding to outsource neuroscience research in 2012, Soriot said. Merck & Co.’s MK-8931 entered late-stage testing on Jan. 10.

A second possible late-stage entry is roxadustat, an oral medication for anemia related to chronic kidney disease and end-stage renal disease. AstraZeneca licensed the treatment from FibroGen Inc. in July, paying $350 million upfront and as much as $465 million in future payments.

AstraZeneca may also accelerate development of AZD9291, a treatment for advanced non-small cell lung cancer that’s in early-stage testing.

The American Society of Clinical Oncology meeting starting May 30 and the European Society for Medical Oncology congress starting Sept. 26 will be critical as data is expected for several of its cancer drugs, Soriot told analysts.

Fourth-quarter revenue sank 4 percent at constant exchange rates, and AstraZeneca forecast that sales this year will decline by a low- to mid-single-digit percentage, the company said yesterday.

AstraZeneca’s shares already may have priced in success in the pipeline. The stock has returned 32 percent including reinvested dividends in the past year, outpacing the 22 percent return for the Bloomberg Europe Pharmaceutical Index, as investors looked beyond the so-called patent cliff.

“The shares’ recent performance owes little to near-term fundamentals and much to long-term pipeline hopes,” Mark Clark, an analyst at Deutsche Bank AG, wrote in a report today.

Before it's here, it's on the Bloomberg Terminal.