AstraZeneca Counters Pfizer With $45 Billion Sales Forecast

May 06, 2014 12:36 pm ET

(Updates with business secretary’s comment in 12th paragraph.)

May 6 (Bloomberg) -- AstraZeneca Plc, the target of Pfizer’s Inc.’s takeover bid of more than $100 billion, forecast long-term sales growth as the company seeks to convince investors that it can succeed as a standalone drugmaker.

AstraZeneca will generate more than $45 billion in yearly revenue by 2023, following “strong and consistent” growth starting in 2017, the London-based company said today in a statement. Its pipeline of drugs, led by lung and ovarian cancer treatments, could generate as much as $63 billion in peak-year sales, the company said. Revenue last year totaled $25.7 billion.

AstraZeneca last week rejected a takeover bid by Pfizer of 62.6 billion pounds ($106 billion) in a mix of cash and stock that valued the company at about 50 pounds a share. The offer failed to appreciate the promising medicines the company is developing, AstraZeneca said, and threatened to disrupt its progress. The pipeline is the product of a strategy announced last year to turn the company around, Pascal Soriot, who took over as chief executive officer in 2012, said in the statement.

Opposing ‘Distraction’

“Any distraction can suddenly have a negative impact,” Soriot told analysts and investors on a conference call. “We are in a race with many of our competitors to get products into the marketplace. Any distraction that causes us to slow down, or any distraction that causes us to lose talent, can destroy value.”

Andrew Widger, a spokesman in the U.K. for New York-based Pfizer, declined to comment on AstraZeneca’s presentation today.

AstraZeneca’s expectations are “ambitious, to say the least,” and rely on the ultimate approval of products that are high-risk, have unclear market potential or are in areas where the U.K. drugmaker lags behind competitors, according to Barclays Plc analysts, including Mark Purcell.

“We are deeply skeptical of Astra achieving such a level of revenues,” Purcell and his colleagues wrote in a report to investors.

AstraZeneca fell 2.7 percent to 4,677 pence at the close in London. Pfizer declined 1.3 percent to $29.58 as of 12:34 p.m. in New York.

Product Prospects

Only 30 percent of the projected $45 billion in revenue in 2023 stems from drugs in the pipeline, Soriot said. There is a low chance of success for any one drug, he said. In aggregate, products in the pipeline have a 36 percent chance of success and the company isn’t relying on any of them, he said.

“I can’t tell you what products will make it,” the CEO said. “But I can tell you none of the products is more than 10 percent of the pipeline.”

Lawmakers from across Britain’s political parties have raised questions about implications of Pfizer’s potential takeover of AstraZeneca on jobs and pharmaceutical investments. Executives from the two drugmakers will also be asked to testify about the proposed acquisition, the House of Commons lawmakers Business Committee said today in a statement.

The Unite and GMB labor unions asked for a meeting with U.K. Business Secretary Vince Cable to urge him to impose a “national interest” test on the deal. They accused Prime Minister David Cameron and Chancellor of the Exchequer George Osborne, both Tories, of being supportive of the Pfizer bid while AstraZeneca workers haven’t been consulted.

Intervention ‘Constraints’

Cable, who said he would be happy to meet with the unions, said the government is “working hard within the constraints we have” to secure a positive outcome for British jobs and science. European Union rules restrict the amount that states can intervene in business transactions, and British law only allows intervention on issues of national security, media plurality and banking, he said.

“The government must and will approach this from a position of even-handed neutrality,” Cable said in Parliament. “I’m not ruling out intervention. We have to look at all the options open to us.”

AstraZeneca reiterated that 2017 revenue will be in line with its 2013 sales. Analysts estimate its revenue falling to $24.3 billion in 2016.

Growth will be driven by AstraZeneca’s strength in diabetes and respiratory disease treatments, which may each bring in about $8 billion in sales in 2023, as well as Brilinta, a heart medicine that may garner about $3.5 billion. it said. Whether Brilinta meets that goal depends on winning approval of the drug for different uses, Tim Anderson, an analyst with Sanford C. Bernstein & Co., wrote in a note to clients.

The company is also counting on increasing sales in emerging markets, including China, and Japan.

Cancer Therapies

AstraZeneca said its investment in science is paying off, particularly in a line of cancer therapies that stimulate the body’s immune system to fight off the disease, and its drugs are worth more than analysts predict. For example, AZD9291, a lung cancer medicine, could be worth $3 billion a year, compared with estimates of as much as $2 billion.

“Immuno-oncology is the therapeutic area that is getting the most investor attention now, but AZN will be a late entrant into the category and it is unclear how the company will compete effectively if there is no differentiation with its molecule,” Anderson wrote. “It does have other immuno-oncology products also in development.”

An experimental Alzheimer’s treatment could be worth $5 billion, compared with estimates of as much as $3 billion. That drug has about a 9 percent chance of success. Merck & Co., based in Whitehouse Station, New Jersey, has a similar medicine in a more advanced stage of development, Anderson said.

--With assistance from Robert Hutton, Thomas Penny and Makiko Kitamura in London.