AstraZeneca's decision to recruit Roche COO Pascal Soriot as the new CEO reflects a lot about how the company ($AZN) sees its future. In Soriot they have a top executive from a successful pharma company who also helmed an industry-leading biotech operation--Genentech. In many ways, Roche ($RHHBY) is everything that AstraZeneca is not but desperately wants to be--inventive, focused, with a reputation for success in biotech innovation. And that says a lot about the strategies that AstraZeneca will follow in the years ahead.
AstraZeneca's future is important for the biotech industry. A series of blowups in the clinic left former CEO David Brennan with little to brag about in terms of deal-making skills or new product development, the wrong kind of track record for a company that finally rolled up to the patent cliff in poor shape for what was ahead. The company's financial condition forced deep R&D cuts. But this year the company has taken out its checkbook in search of deals. They have acquired companies (Ardea), licensed products (the Amylin deal) and made no secret of the fact that more deals were in the offing.
Analysts who have been following AstraZeneca expect Soriot to continue the same basic strategy. New deals will be needed, but no one expects to see any acquisitions that break much past the $10 billion barrier. Megamergers are not on the table, but companies who find themselves at the table with AstraZeneca might reasonably expect to see a premium, provided they have some other interested bidders on hand to drive up the price.
"He will be looking to make significant changes, including reviewing the pipeline and doing more deals. He'll have to work fast because there's an uphill struggle now to grow sales in the face of major patent losses," Cenkos Securities' Navid Malik tells Reuters.
AstraZeneca's attempt to add a big biotech operation involved MedImmune, which, like Roche's Genentech, has been styled as its biologics leader. But MedImmune has yet to produce the kind of clinical achievements that have been the hallmark of Genentech's success. The focus now is on biotech growth, and subsidiaries like MedImmune will be expected to play their part.
"No one is blind to the challenges that confront the pharmaceutical sector and this company, but the underlying strengths of AstraZeneca in delivering on its strategy are clear," Soriot said in a statement.
The challenge now is to execute a quick turnaround, proving that AstraZeneca has a bright future.
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