By Hester Plumridge
LONDON-- AstraZeneca PLC fleshed out its stand-alone strategy
Tuesday with ambitious new revenue targets, four days after turning
down a $106 billion takeover bid from Pfizer Inc. that has ignited
fierce U.K. political debate.
The U.K. drug maker, which said New York-based Pfizer's offer
"substantially" undervalued its business, said Tuesday it was
aiming to generate annual revenue of more than $45 billion by 2023,
an 84% increase on the $25.71 billion it booked in 2013.
AstraZeneca also highlighted the potential value of its pipeline
of cancer, asthma and diabetes drugs in development, forecasting
the new drugs to generate peak annual sales of between $23 billion
to $63 billion, depending on the proportion that might receive
regulatory approval.
"The increasingly visible success of our independent strategy
highlights the future prospects for our shareholders," said
AstraZeneca Chairman Leif Johansson.
In a Friday interview with The Wall Street Journal, Chief
Executive Pascal Soriot said AstraZeneca's pipeline was
"underappreciated," highlighting 11 drugs in the final stages of
clinical testing and a "very strong oncology franchise."
Valuing a drug company's pipeline is notoriously difficult.
Pipeline drugs might be blocked by regulators or discontinued as
ineffective; alternatively they could generate billions of dollars
in annual sales.
Roughly a fifth of AstraZeneca's current valuation is based on
estimated future sales of its pipeline drugs, estimates Credit
Suisse, almost twice as high as the average for its European rivals
including Sanofi, Novartis AG and Roche Holding AG.
New sales estimates AstraZeneca gave Tuesday for its pipeline
drugs include up to $6.5 billion for its biggest hope: new cancer
treatment MEDI4736, compared with analyst estimates of $2 billion
to $7 billion cited by the company.
AstraZeneca also set out new revenue targets for its five growth
areas. Annual revenue estimates for 2023 now include $3.5 billion
from its blood-thinning pill Brilinta, $8 billion from its
portfolio of diabetes drugs and $8 billion from respiratory drugs.
The company said it expects mid-to-high-single-digit percentage
revenue growth in emerging markets and low-single-digit revenue
growth in Japan.
Analysts at Jefferies, a brokerage, said in a note to clients
that the new business forecasts appeared "overly optimistic,"
particularly with regard to the updated targets for the five growth
areas.
AstraZeneca is facing flat or declining revenue in coming years,
as its best-selling drugs lose patent protection, but Mr. Soriot
has focused on rebuilding the company's pipeline and returning it
to growth.
Pfizer has been pursuing its British rival since November, but
AstraZeneca has rejected the advances. Last week, AstraZeneca said
Pfizer's most recent cash-and-stock proposal valued at GBP50 ($84)
a share "substantially" undervalued the company. Tuesday,
AstraZeneca shares were down 2.7% to GBP46.80 in afternoon London
trading.
U.K. opposition leader Ed Miliband has called for an "immediate
independent assessment" of whether Pfizer's proposed takeover is in
the national interest, after accusing the U.K. government of
"cheerleading" for the deal in an open letter to Prime Minister
David Cameron.
A spokesman for Mr. Cameron said Tuesday that the government was
unapologetic in its "active engagement" with both parties over a
potential deal, stressing that any decision was a matter for the
companies, their boards and shareholders.
Representatives from Pfizer and AstraZeneca will be called
before a U.K. parliamentary committee in coming weeks to discuss
the potential takeover, a representative from the Department for
Business, Innovation and Skills said Tuesday. While a committee
could ask difficult questions over a proposed deal, it would have
no powers to block it.
AstraZeneca's strategy update comes a day after Pfizer sought to
increase pressure on the British company to enter talks on creating
the world's biggest pharmaceutical company. Pfizer also reported
declining quarterly results that underscored why it is interested
in a tie-up.
In an interview Monday, Pfizer Chief Executive Ian Read said the
offer was "compelling" and urged the U.K.-based company to enter
talks.
"I'm hoping they will come back into discussions, but we are
reviewing our options," he said.
Mr. Read agreed that Pfizer's options include walking away from
a potential deal and even looking for a different one, though he
argued that a combination would benefit both companies and their
shareholders.
He added that his talks with AstraZeneca shareholders suggest
they are open to doing a deal and want to discuss the terms
further.
While some AstraZeneca shareholders would be open to the company
discussing a sale, many support the company's board in resisting
Pfizer's approach, according to conversations The Wall Street
Journal has had with people familiar with the talks.
Jonathan D. Rockoff and Nicholas Winning contributed to this
article.
Write to Hester Plumridge at Hester.Plumridge@wsj.com
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