9. AstraZeneca: Trying to shed a reputation for constant sorrows

Briggs Morrison

2013: $4.82B
2012: $4.24B (restated)
Change: Up 13%
As a % of revenue: 18.7%
Heads of R&D: Briggs Morrison, Mene Pangalos, Bahija Jallal

AstraZeneca ($AZN) had become the poster child for R&D dysfunction at the end of 2011, beset by repeated clinical failures, suffering from one of the thinnest pipelines in the industry and led by a CEO, David Brennan, whose executive confidence started to look like cluelessness.

New CEO Pascal Soriot has tried to mount a comeback using some dramatic maneuvers. With considerable fanfare he's building a new HQ in Cambridge, scrapping facilities in Alderley, partnering on a slate of programs that range from the very early stages of research to already approved, and vowing to do more deals. Recently, he even declared that the turnaround of the company had been accomplished, even though generic competition will continue to eat up its revenue line for some years to come.

Now that Pfizer has come calling with a $106 billion buyout offer, AstraZeneca execs have followed up by claiming the pharma giant already has the drugs needed to create a fantastic future. They even attached some rosy--if not occasionally outlandished--peak sales projections to make their point. Now they just have to sell it to investors, many of whom have been disappointed before. 

Mene Pangalos

Last fall and early this year, amid the bullish R&D pronouncements, AstraZeneca's share price mounted a major rebound. Part of that appears to be due to AstraZeneca's appearance in the race for immuno-oncology drugs. The company isn't in the lead of this race. It's not in second, or even third place. Rather you can find it in fourth place, behind Bristol-Myers Squibb ($BMY), Merck ($MRK) and Roche ($RHHBY). Early data may pop up at ASCO in early June, though, and investors have become so whipped up at the idea of buying into a golden lottery ticket that AstraZeneca has benefited from the heated speculation about patient benefits and peak sales. Immuno-oncology was also back in the spotlight after it emerged that Pfizer ($PFE) made at least a passing offer of $101 billion for the company--a head-scratcher for any long-term observers of M&A, as megamergers are definitely out of favor.  

Happy to see the renewed interest in the company, AstraZeneca is now pushing the immuno-oncology program for the anti-PD-L1 MEDI4736 into Phase III. The pharma giant also recently signaled that its lung cancer drug AZD9291--a third-generation irreversible epidermal growth factor receptor TKI which has just been awarded "breakthrough" status by the FDA--is also headed directly into late-stage testing, alongside benralizumab and tralokinumab. Benralizumab is an IL-5 asthma drug and tralokinumab is an IL-13 anti-inflammatory.

The lottery ticket syndrome also seems to be playing a role for AZD3293, a BACE inhibitor drug for Alzheimer's that is stirring excitement in some circles at the idea of being moved into a late-stage study. AstraZeneca is competing in a field in which there's no certainty of what causes the disease or that this drug is completely safe.

But one big blockbuster in the pipeline could seriously pump up overall revenue. And there is no bigger payoff possible than the one that awaits the first new Alzheimer's drug.

First, though, they'll have to prove that it works.

Bahija Jallal

Winning has now become a mantra at the company. That helps explain why the pharma company bailed on researching drugs for neglected diseases. Anti-infectives and neurosciences are also on the out now at AstraZeneca, as Soriot narrowed the company's broad R&D range in the wake of its Q1 numbers.

One of the last deals Brennan approved before his departure was the $1.26 billion buyout of Ardea, which controlled a very interesting gout drug. He and then-R&D chief Martin Mackay may have done something right. A few weeks ago top-line results for lesinurad demonstrated a strong response, spurring some excitement among the analysts following the company.

Among its top drugs in late-stage development is olaparib, once a big write-off but now back in the clinic. AstraZeneca reversed that big charge-off after dosing the first patient in a Phase III trial inspired by a retrospective analysis of the midstage data--a high-stakes gamble that the PARP inhibitor will benefit a large portion of the patient population with a BRCA mutation.

Repurposing failed drugs doesn't earn a lot of respect among analysts, though. Amgen ($AMGN) and AstraZeneca are partnered on the IL-17 therapy brodalumab, one of a number of late-stage psoriasis drugs that will be crowding into the market together--also not the kind of clean breakout drug investors are looking for.

Last February--as AstraZeneca quietly swept out failed drugs, including one for depression, as it heralded advances--the pharma giant counted 11 drugs in late-stage development, with another 19 waiting in the wings.

That's not enough for Morningstar, which placed AstraZeneca out of the top 10 after assessing a miserable track record on new drug approvals. Add it all up and Morningstar sees long-term negative growth, keeping AstraZeneca in the industry cellar.

For more:
Special Reports: Biopharma's Top R&D Spenders of 2012 - AstraZeneca | FierceBiotech's 2011 Women in Biotech - Bahija Jallal
AstraZeneca continues to chop back, spotlights immuno-oncology PhIII
AstraZeneca cozies up to MRC scientists amid an R&D rethink
AstraZeneca's PhIII chief scouts for blockbuster deals as revenue slides

9. AstraZeneca: Trying to shed a reputation for constant sorrows

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