AstraZeneca set for bleak two years as blockbusters expire

AstraZeneca is bracing itself for two years of shrinking sales as two of its three remaining blockbusters, Nexium and Crestor, go off patent.

The company now looks to have shaken off the prospect of a takeover by Pfizer, which preoccupied it for much of last year, but AZ is now asking investors for patience, promising growth will return in 2017.

The loss US patents on Nexium and Crestor in 2015 and 2016 respectively will wipe billions from the firm’s income over the next two years, with AZ predicting sales will shrink by 5 per cent or more.

Last year was a major success in terms of new products – AstraZeneca had six approved, the most of any company in the sector, but it has no product which can fill the gap left by ageing blockbusters.

The firm’s third and final existing blockbuster is respiratory drug Symbicort. The firm is progressing with plans to expand its licensed use in asthma patients, a move likely to help extend its big-earning lifespan.

AZ managed to grow revenues by 3 per cent in 2014, with a delay to a Nexium generic and a strong 70 per cent growth of cardiovascular drug Brilinta boosting figures.

The brace of new drugs approved last year, including first-in-class ovarian cancer drug Lynparza represent the next generation of drugs for the firm, but none are expected to come close to earning the $3.65 billion earned by Nexium last year, or Crestor’s $5.5 billion tally.

Asked whether investors would be rueing the missed opportunity of a Pfizer takeover, chief executive Pascal Soriot commented:

“If you are an investor in AZ today, it is because you believe in our long term future.”

He added that the Pfizer offer of £55 per share offer made last May (valuing the firm at £69.4 bn or $117 bn) would probably never have come off.

“I think people really need to remember that in all likelihood this $55 per share deal was never going to happen.

You just have to look at what happened to AbbVie and Shire – the US government changed the rules and that made tax inversion not impossible but far less attractive.”

Soriot said any such aborted deal would have caused ‘turmoil’ at AstraZeneca. He said that the firm is now seeing the fruits of greater R&D productivity, so much so that it will increasingly out-licence drugs developed in-house and collaborate with external partners, in much the same way that biotech firms do.

He pointed to a deal struck with Lilly in September last year to develop a new BACE inhibitor drug for Alzheimer’s. Soriot said such ‘externalisation’ would increase the success rate of drugs in diseases which the firm no longer considers as core therapy areas.

Platforms for growth and oncology

The company’s long-term plan is for sustainable growth to return by 2018, with sales then picking up rapidly, rising to $45 billion in 2023. This is nearly double the current annual revenue, and many analysts are sceptical about AstraZeneca’s chances of hitting this target.

Crucial to this target are the company’s five growth platforms: heart drug Brilita, its diabetes franchise, respiratory drugs, emerging markets and Japan.

Despite warnings of a wider economic slowdown in China in the next few years, AstraZeneca is particularly confident of growth in the country, which became its second biggest market in 2014.

A sixth ’emerging’ growth platform is oncology, but AstraZeneca is aware that it is trailing a number of more dominant players in the field.

One of the firm’s brightest hopes is its phase 3 PD-L1 immunotherapy cancer drug MEDI 4736, which is being tested in a broad range of cancers, and in combination with a number of other agents.  Its lead indication is in non-small cell lung cancer (NSCLC) – but it looks increasingly at risk of being an also ran in this field.

MEDI4736 is trailing behind the two leading drugs in the field, Merck’s Keytruda and Bristol-Myers Squibb’s Opdivo, now both approved in melanoma, and closing in on approval for NSCLC. Roche’s contender MPDL3280A has just gained FDA breakthrough therapy designation in NSCLC, making it the likely third PD-1/PD-L1 to market.

The firm’s head of medicines development and chief medical officer Briggs Morrison refused to confirm whether or not AstraZeneca has sought breakthrough status for MEDI4736, but it looks increasingly likely not to gain the sought-after status in NSCLC.

Pascal Soriot says the firm has always known that it is playing catch up in this exciting new cancer field, and says it is banking on its many combination trials yielding stand-out results.

The firm does have another drug with the coveted FDA breakthrough status in NSCLC  – a new targeted drug called AZD9291 which has shown promising early results in patients with the EGFR mutation.

See the firm’s full 2014 results announcement here

 

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