Pharma

AstraZeneca CEO faces familiar question on how to grow

Amidst calls by shareholders for a management shakeup, AstraZeneca (NYSE: AZN) CEO David Brennen sought […]

Amidst calls by shareholders for a management shakeup, AstraZeneca (NYSE: AZN) CEO David Brennen sought to reassert his position in an interview with Bloomberg at the Pharmaceutical Research and Manufacturers of America’s annual meeting in Boston. He said the company would not need to have a merger to effect changes at the British pharmaceutical company.

“If it’s about restructuring, we can do that without a big deal… Maybe somebody sees something different, but spending more money does not have a linear increase in the number of returns you get from a research and development perspective.”

Maybe all the speculation surrounding Watson Pharmaceutical’s plan to buy Swiss drug maker, Actavis, in a $6 billion deal, along with the clutch of acquisition deals of late, reflects the spread of M&A fever as pharmaceutical companies look for relatively rapid ways to ease product pipeline angst.

Even Glass Lewis & Co., a proxy firm which seemed to support the management in its most recent report to AstraZeneca shareholders, acknowledged the patent cliff concerns:

The company faces one of the highest exposures to U.S. drug-patent expiration in the pharmaceutical sector, with Seroquel and Atacand losing their patents in 2012, followed by Nexium in 2014/15, and the company’s best selling product Crestor in 2016.

But with its $15.6 billion acquisition for MedImmune in 2007 yet to prove itself worthy of the purchase price, it’s understandable that the management is not convinced that another acquisition is the way to go.

More collaborations seem the best way to proceed. AstraZeneca’s deal with Amgen earlier this month to co-develop and commercialize five monoclonal antibodies to treat inflammatory diseases will cost it $50 million and 65 percent of the development costs over the next two years. One of the drugs, for psoriasis, psoriatic arthritis and asthma, is poised to start Phase 3 clinical trials.

AstraZeneca’s launch of its hypertension drug Dutoprol, combining Metoprolol Succinate with a low-dose diuretic, could boost its patient ranks considering 33 percent of Americans have the disease. It will make the drugs available by mail order as well as through pharmacies.

Taking a glass half full view, analysts have also noted that some products have blockbuster potential, such as Dapagliflozin for diabetes and cardiovascular drug, Brilinta, if physicians take to using it with low-dose aspirin.

But with every other pharmaceutical company looking for the ideal collaborative partner, AstraZeneca may find that it needs to fork out more for research and development expenses and look for partnerships with earlier stage products to deepen its pipeline.

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