07.01.10
#5 - AstraZeneca
15 Stanhope Gate
London W1K 1LN (UK)
Tel: (44) 00 7304 5000
Fax: (44) 020 7304 5151
www.astrazeneca.com
Headcount | 63,000 | |
Year Established | 1999 | |
Pharma Revenues | $31,905 | +4% |
Total Revenues | $32,804 | +4% |
Net Income | $7,544 | +23% |
R&D Budget | $4,409 | -15% |
2009 Top Selling Drugs | |||
Drug | Indication | Sales | (+/-%) |
Nexium | peptic ulcer, acid reflux | $4,959 | -5% |
Seroquel | anti-psychotic | $4,866 | +9% |
Crestor | cholesterol management | $4,502 | +25% |
Symbicort | asthma | $2,294 | +14% |
Arimidex | oncology | $1,921 | +3% |
Atacand | hypertension | $1,436 | -2% |
Pulmicort | asthma | $1,310 | -12% |
Seloken/Toprol | hypertension | $1,433 | +79% |
Synagis | respiratory syncytial virus | $1,082 | -12% |
Zoladex | oncology | $1,066 | -6% |
Losec/Prilosec | peptic ulcer, acid reflux | $946 | -10% |
Merrem | anti-infection | $872 | -3% |
Casodex | prostate cancer | $844 | -33% |
Account for 86% of total pharma sales, same as in 2008.
PROFILE
Last year, I wrote about how AstraZeneca may find itself as a target for a takeover. Now I can’t envision any of its competitors trying to assimilate it. AZ faces one of the steepest patent cliffs in the industry in the next five years; a Bloomberg report noted that drugs that generated 62% of AZ’s 2008 revenues will face generic competition (not in all markets) by 2014. With around $20 billion in generic exposure, there are likely few suitors looking to buy in just now.
Acquisition News
Target: Novexel Price: $350 million, plus $75 million in milestones (Forest Laboratories will pay half of the acquisition cost) Announced: December 2009 What they said: “The innovative structure of this agreement allows us to build on our existing collaboration with Forest to create value, share costs, and reduce exposure to risk while developing two novel antibiotic combinations that address a growing problem for clinicians and patients. Utilizing Novexel’s NXL-104, these combinations have the potential to outwit bacteria that would otherwise be resistant to antibiotics.” —Anders Ekblom, executive vice-president of development, AZ |
For the most part, AZ has eschewed the “consumer and generics” diversification strategy of its larger competitors, trying instead to research and develop its way out of its pending patent pasting. After several regulatory delays for key products, the company elected to partner with India-based Torrent Pharmaceuticals in March 2010 to sell 18 of Torrent’s branded generic products in nine countries. In AZ’s announcement about the deal, the company noted it “over time plans to broaden its portfolio beyond these 18 products.” We’ll see if that means an expanded alliance with Torrent, or more companies in more regions.
Meanwhile, top-seller Nexium is already sliding as generics whittle away at it in certain markets. The company has tried to develop a number of combo-products with Nexium, with mixed results. The submission for Axanum, a combo of aspirin and Nexium, received a Complete Response Letter from the FDA in June 2010 (as did an sNDA of Nexium to reduce risk of of low-dose aspirin-associated peptic ulcers), but Vimovo, a delayed release combo of Nexium and naproxen, was cleared by the FDA in May 2010 to treat a number of inflammatory conditions along with the risk of developing NSAID-related gastric ulcers.
The Lowe Down
It’s been one nasty regulatory experience after another for AstraZeneca in recent months, which is just what they didn’t need. They’ve got as much to worry about as anyone in the industry with their oncoming patent expirations, so watching the newer stuff stumbling around in the late stages must be pretty hard to take. But “hard to take” is probably a good summary of what it’s been like to work there recently, too. There have been waves of closures and layoffs, and no one can be sure that more earthquakes aren’t in store. After a company bails out of R&D areas that it’s been in for decades, no one can predict what’s coming next. And AZ, like many of its peers, has been in deal-making mode and has announced that it’s ready for more. The problem with this is that when everyone wants to make lots of deals, the price of any individual deal — one worth making, anyway — can do nothing but go up. Here’s hoping that some of them work out — this is a company that could use some good news for once. (And in case you’re wondering: no, a whopping merger would not qualify as anyone’s idea of “good news”).—Derek Lowe |
As with most of its competitors, AZ’s story is one of R&D misses and regulatory delays. Motavizumab, the company’s followup to respiratory drug Synagis, received a Complete Response Letter in December 2009. That’s not just a setback for AZ, which will lose patent protection on Synagis by 2015, it’s also more ammunition for critics of AZ’s $15 billion purchase of MedImmune in 2007.
Certriad, a combo of AZ’s Crestor and Abbott’s TriLipix, also received a Complete Response Letter in March 2010. That one will likely require a lengthy outcomes trial, which could sink its chances of getting to market. Having a Crestor-combo would have helped preserve a portion of the drug’s revenues. Shortly before press time, AZ received a ruling upholding the validity of a key Crestor patent (it’s a surreal court case).
Still, that’s not as bad a turn as the one taken by cancer drug Zactima. The NDA/MAA submissions for Zactima were withdrawn in October 2009, three months after filing, when ongoing Phase III data indicated no survival benefit in NSCLC compared to chemotherapy on its own. (It’s doing better in a trial against thyroid cancer, a much smaller patient base than NSCLC.)
AZ must have its collective fingers crossed that Brilinta doesn’t suffer a similar fate. The company filed an NDA for that antiplatelet treatment in November 2009, with hopes of treating patients with acute coronary syndrome. It’s a huge market, dominated by Plavix. In a massive head-to-head study, Brilinta demonstrated both superior efficacy and a comparable safety profile to Plavix. The safety side is critical; Effient, Lilly’s attempt at biting into the Plavix market, has struggled to build market share, thanks in part to its risk of major bleeding. Some analysts peg Brilinta’s peak sales between $1.5 and $3.0 billion, which could help cushion the fall from that patent cliff in a few years.
But in the short term, AZ’s in for a world of hurt. Good thing they have a new R&D chief! In May 2010, AZ hired Martin Mackay, formerly Pfizer’s small molecule R&D head, for the new role of president of R&D. By “new role,” I mean that AZ kept research and development separate until now. He’s inheriting a system had more misses than hits in recent years, but he’s also at a company where the chief executive officer, David Brennan, has been honest with shareholders and analysts that the next few years are going to be rocky.
Outsourcing News
A few years ago, AZ turned heads with its slip-of-the-tongue mention of outsourcing all of its manufacturing within the next few years. The company rapidly backtracked on that statement, but admits that it plans to outsource all of its API needs before decade’s end. The company is pursuing outsourcing strategies across the R&D and manufacturing chains. As part of that plan, AZ sold off its API facility in Dunkirk, France to Minakem in June 2009. The site makes the API for Nexium, which AZ was planning to source partly from Ranbaxy in India. In May 2009, AZ entered a risk/reward-sharing research collaboration with Jubilant Biosys, a Bangalore-based company, to provide chemical lead generation and optimization for potential pain and neurology research. In November 2009, AZ entered an alliance in which Quintiles will provide clinical pharmacology studies globally across multiple therapeutic areas. In addition to clinical conduct and medical oversight of studies, the deal covers “a range of activities across the end-to-end study process,” according to a Quintiles statement. In its annual report, AZ notes that its clinical data is handled by Cognizant Technology Solutions Sweden AB. In June 2010, AZ and Keats Healthcare Ltd. signed a service agreement covering the administration and distribution of AstraZeneca UK Ltd products into the Comparator Trial Market. Keats will act as the sole point of enquiry, order receipt and distribution for AstraZeneca UK Ltd products to other manufacturers and comparator trial specialist organizations looking to acquire product for clinical trial requirements. It’s not a huge outsourcing deal, but it’s a sign of the times. |
Or, as he put it during a Bloomberg interview in February 2010, the company is entering “a period of fluctuating earnings.” In the same interview, Dr. Brennan tried to make the case for sticking with R&D. He remarked:
“The business that we know well and that we’ve been very successful in is the innovation-driven, research-based human health pharmaceutical model. We do not have expertise in other areas. People say, why aren’t you in the generics business? We don’t run a generics business, we run a higher-end manufacturing business. Why aren’t we in the consumer health business? We don’t have any consumer health products.”
It’s rare to hear a CEO speak so plainly about his company’s prospects. There’s no way to put a happy face on AZ’s situation, and maybe it’s a plea to keep his job during the coming years of earnings decline, but it’s a lot better message than, “Nothing to see here! We’re going to cruise past this with ease!”
Now if they could just stop making massive settlements for improper marketing ($520 million for Seroquel) and overcharging Medicare and other payors ($103 million for Zoladex and Pulmicort Respules), maybe I’d feel a little better about their business . . .
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