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AstraZeneca
Oct2007

  1. A Merger of equals
  2. Troubling Times?
  3. Acquiring the Remedy
  4. The Current Outlook
  5. Light at the End of the Tunnel?

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Company Analysis - AstraZeneca

Acquiring the Remedy

Graph 1: The world status of compounds in AstraZeneca's pipelineGraph 2: The world status of compounds in GSK's pipeline
For a company as large as AstraZeneca, there is a potential cure to its ills, namely to acquire its way back to a promising pipeline portfolio. It seems that this has been CEO David Brennan’s key business strategy over the last 18 months, with the well-publicized US$15.2 billion (£7.6 billion) acquisition of the US biotechnology company MedImmune in April being the biggest deal yet, taking the company into debt for the first time. Of the deal, which substantially builds AstraZeneca’s biotechnology portfolio, Brennan said, …“The world of science has changed substantially and to have a successful strategy as a drug company, you have to access the best science, be it internal or external”. Indeed, in AstraZeneca’s case, it seems external product sourcing is its chosen route to success.

The purchase of MedImmune brings a strong product portfolio comprising 45 compounds to the table. The main offering is Syangis (palivizumab), a monoclonal antibody against respiratory syncytial virus which showed sales of US$1.1 billion in 2006. It also brings its intranasal influenza vaccine FluMist, which despite having only seen modest sales until now, may bring higher revenues with the backing of AstraZeneca’s marketing and sales force, and with the impact of the news in September 2007 that the US FDA has approved its use in children under 5, which will significantly enhance the market for this product. An additional latestage gain for AstraZeneca is NuMax (motavizumab), a third-generation monoclonal antibody against respiratory syncytial virus, which has shown promise in Phase III trials. Expected to be filed and launched in the US in 2007 and 2008, respectively, it looks set to generate substantial revenue over the next few years. MedImmune also generates royalties from the human papilloma virus vaccines Cervarix (GlaxoSmithKline) and Gardasil (Merck & Co).

The acquisition of MedImmune was a strategic move in developing a key strength in biotech; a strength that has become a necessity in the top pharma industry. In keeping with Brennan’s business strategy, MedImmune will be merged with the stock from Cambridge Antibody Technology (CAT), a successful biotech business that was acquired by AstraZeneca for US$1.32 billion (£702 million) in May 2006. CAT is well known for its collaboration with Abbott to develop Humira (adalimumab), which had sales of US$2 billion in 2006. AstraZeneca has also gained 2 other antibodies in Phase III and a healthy diversity of earlier-stage programmes from the acquisition of CAT.

From analysis of AstraZeneca’s business movements, David Brennan appears to be attaining therapeutic diversity via acquisition of solid, specialty companies – initiating his move into biotech with the acquisition of Cambridge-based KuDOS Pharmaceuticals, a specialty anticancer company based around the inhibition of DNA repair, in early 2006. Through strategic, complementary deals, the extensively-boosted biotech business, to be headed by MedImmmune’s CEO David Mott, looks now to be a strong contender in the top pharma biologicals market.

In addition, Mr Brennan also recognized the company’s weakness in anti-infectives, triggering the US$150 million acquisition of Arrow Therapeutics in March, which although its most advanced compound is only in Phase II, boasts a promising pipeline of novel antiviral products.

<<Troubling Times?

The Current Outlook>>