AstraZeneca Pledges Sales Boost Even as Strong Dollar Bites

Updated on
  • U.K. drugmaker now expects at least $40 billion in revenue
  • Shares rise to highest ever as CEO cites pipeline’s value

AstraZeneca Plc’s Chief Executive Officer Pascal Soriot pledged to boost sales to about $40 billion to $41 billion by 2023, easing investor concerns about the drugmaker’s pipeline even as the stronger U.S. dollar trims revenue.

A $45 billion sales goal set in 2014 was calculated using exchange rates of 2013, and could change again if the dollar weakens, Soriot said in an interview. The U.K. drugmaker, facing an unsolicited takeover offer from Pfizer Inc. at the time, had promised to deliver better value to investors by doubling down on its pipeline of treatments for cancer, respiratory ailments and heart disease.

Pascal Soriot

Photographer: Victor J. Blue/Bloomberg

“Oncology is becoming a critical part of our future,” he said on Thursday while reflecting on that goal. “We now have more oncology sales in our forecast and less diabetes sales.”

The stock rose to its highest level on record. Investors had grown increasingly skeptical about Soriot’s ability to deliver on the sales target as the U.K. company fell behind rivals on newer cancer therapies to replace blockbusters that were losing patent protection. A U.S. court ruled this month that AstraZeneca can’t stop generic-drug makers from bringing cheaper rivals of its best-selling medicine Crestor to the market.

“They would have to have serious success in their immuno-oncology pipeline” to reach Soriot’s target, said Laura Foll, a London-based fund manager at Henderson Global Investors, which owns shares in Astra. “We hold it on the expectation that they grow a lot from where they are now: you don’t necessarily need to get to 45 or 41 for it to be interesting.’’

The CEO said AstraZeneca doesn’t need to do more deals to reach its sales goal, following deals late last year that brought in treatments for cancer, lung ailments and a life-threatening condition called hyperkalemia. The company’s pipeline is so attractive now, that it could draw takeover interest from Swiss drugmaker Novartis AG, analysts from Citigroup Inc. said in a note to investors on Wednesday.

Novartis CEO Joe Jimenez said July 19 that anything bigger than a bolt-on purchase would have to be “instantly understandable as a good deal for Novartis shareholders.” Novartis and AstraZeneca both declined to comment on the speculation Thursday.

Shares of AstraZeneca rose 6.3 percent to 4,985.50 pence as of 3:38 p.m. in London trading. That’s the highest price since 1993, when a predecessor company was spun off and listed on the London Stock Exchange. The stock has climbed 12 percent in the past year.

Cancer Leader

Half of the company’s R&D investments are in cancer products, including those that harness the body’s immune system to fight tumors. Astra is betting on its in-house combination of immune-oncology agents, which would compete with treatments already on the market from Merck & Co. and Bristol-Myers Squibb Co., to bring it back into prominence in the field. The company, which gave the world its first targeted cancer therapy 16 years ago, has since become better known for mass-market pills like Crestor for lowering cholesterol.

The London-based company’s profit plunged in the second quarter as Crestor lost sales to generic competitors. Total revenue for the quarter fell 11 percent to $5.6 billion, compared with a $5.58 billion average estimate from analysts, AstraZeneca said in a statement Thursday. Crestor sales dropped 29 percent to $926 million, falling short of analysts’ estimate of $990 million.

Astra aims to bring to market six new cancer products by 2020, including a combination of the PD-L1 checkpoint inhibitor durvalumab with another checkpoint inhibitor called tremelimumab, a drug it licensed in 2011 from Pfizer. The combination is being tested on patients with an array of cancers including non-small cell lung and head and neck.

“What is slightly more optimistic or helpful for us as a shareholder is that the newer products -- the new Astra if you like -- seem to be selling well,” Foll said. “If AstraZeneca happened to get a few multi-billion dollar products, it would make a huge difference.”

— With assistance by James Paton

(Updates with takeover speculation in seventh paragraph.)
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