June 20, 2014 7:13 pm

AstraZeneca set to bolster takeover defences

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AstraZeneca is considering selling the rights to some of its future revenues in a move that would boost the UK drugmaker’s cash reserves and help stifle any renewed takeover attempt by its US rival Pfizer.

The London-based company, which saw off a near-£70bn approach by Pfizer last month, is working with bankers to explore the sale of future income streams from some of its existing medicines, said people familiar with the matter.

Such a move would bring in billions of dollars in cash for AstraZeneca, which could be returned to shareholders or used to fund research and development. It would also make the company less attractive to Pfizer, by denying it access to some future revenues in the event of a takeover.

The idea is among a range of strategic options under consideration by AstraZeneca aimed at increasing shareholder value and bolstering its defences against Pfizer.

While the US company admitted defeat in its pursuit last month, many analysts doubt it has given up altogether on its ambition to make what would be among the biggest takeovers in drug industry history.

Under UK takeover rules, Pfizer could make a fresh approach in November, after a six-month cooling off period, or in late August, after three months, if AstraZeneca was pressured by shareholders to instigate new talks.

The exact scope of the drug-royalties securitisation plan is still being worked out, said one of the people involved, adding that the process was at an early stage.

The people added that such a move was just one option being explored and that no decision or sale was imminent.

Similar schemes have been adopted by other drugmakers. Royalty Pharma, a specialist private equity company, for example, has bought royalties for drugs marketed by companies including Amgen, Biogen Idec and Johnson & Johnson.

Other options under consideration by AstraZeneca include partnership deals or disposals for non-core assets. Pascal Soriot, chief executive, said in April the position of the company’s neuroscience and anti-infection businesses were under review, but indicated that outright disposals were unlikely.

AstraZeneca said: “We continue to sharpen our focus on core priorities and would look at opportunities to maximise the value of our pipeline and portfolio.” This “could include a range of business development options, such as partnering in anti-infectives and neuroscience,” the company added.

Finding ways to increase returns to shareholders could help ease pressure on management in the absence of short-term growth.

Revenues have fallen nearly a quarter in the past three years as old drugs have lost patent protection, with at least two more years of decline ahead.

Mr Soriot has forecast that sales will increase by three-quarters in the next decade as new drugs for cancer, diabetes and asthma eventually reach the market.

But some investors were unhappy that AstraZeneca spurned Pfizer’s £55-a-share offer given the risks surrounding its unproven drugs pipeline. The stock has since fallen back to £44.70.

Certain major shareholders – including BlackRock, which has an almost 8 per cent stake – have signalled their desire for fresh talks at the earliest opportunity. However, Mr Soriot has continued to stress his belief that more value can be created as an independent company.

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