AstraZeneca’s share price has risen 10 per cent since Pascal Soriot was named chief executive at the end of August last year. In normal times, that would be ample reward for righting a listing ship, outlining an ambitious restructuring last month, and promising more investment in science – it is a pharma company, for goodness sake – to renew a depleted drug pipeline. Of course, these are not normal times at AstraZeneca, as Thursday’s first-quarter results showed. But it is too early to give up on either Mr Soriot or the company.
There is a lot about AstraZeneca not to like. The 13 per cent fall in revenue in the period to $6.4bn was higher than the more pessimistic predictions. Core operating profit and earnings per share were down by a quarter. The patent cliff whacked AstraZeneca for $1bn of revenue, with three of its drugs accounting for 90 per cent of that. Moreover, its Brilinta cardiovascular treatment, on which many of its hopes for a return to growth are pinned, continues to underwhelm, with sales of just $50m in the quarter.
True, it is early days for Brilinta. Mr Soriot insisted at the strategy presentation last month that he intended to beat consensus estimates of 2018 sales of $1.3bn for the drug. But that is well below the peak sales of AstraZeneca’s old stalwarts – the drugs Crestor (peak sales in 2011 of $6.6bn), Seroquel ($5.8bn in 2011), and Nexium ($5.2bn in 2007). It is imperative both that Brilinta delivers and that AstraZeneca does not become too dependent on it.
Mr Soriot did not promise the sun along with the moon last month. Restoring AstraZeneca’s credibility was a necessary first step, and he succeeded in that investors seem ready to give him a chance to succeed. Since his arrival, AstraZeneca’s valuation gap with peers has narrowed a bit, to about 40 per cent. That may be as good as it gets, for now.
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