When AstraZeneca ($AZN) CEO Pascal Soriot warded off Pfizer’s hostile takeover, he promised to transform the company into something even better. The U.K. company’s recent share price suggests that is happening, but much of that upward momentum has come through the back door.
As Bloomberg points out, the drugmaker’s share price is up 37% since its June low. Some of that is tied to good vibes about its efforts in immuno-oncology, but much of that comes from problems in the U.K. economy and problems faced by competitors.
As Polar Capital fund manager Daniel Mahony sees it, “Astra is showing a bit of leg this year because of pipeline missteps by others,” he told Bloomberg.
It first stock price pop came after the U.K.’s June vote to leave the European Union depressed the value of the pound, helping improve AstraZeneca’s cost outlook since its largest market is the U.S. It will get paid in dollars that are now worth more against the pound.
Secondly, AstraZeneca’s stock price hit a record last week at the expense of a competitor. The spike followed the announcement by Bristol-Myers Squibb ($BMY) that its immuno-oncology drug Opdivo had failed in a trial that would have set it up for first-line use in lung cancer. Bristol said it would push forward with Opdivo in combo with other drugs.
Because Bristol’s Opdivo and Merck’s ($MRK) Keytruda have already been in the market winning approvals, AstraZeneca has been seen as a laggard in the very hot field of immuno-oncology. Merck is seen as benefitting most from Opdivo’s stumble. But AstraZeneca got some lift as well from the afterglow.
As Credit Suisse analyst Vamil Divan pointed out to clients, AstraZeneca, like Bristol and others, is pressing ahead with an immuno-oncology drug cocktail–a PD-L1/CTLA-4 combination of its durvalumab candidate and tremelemumab. “The disruption of BMS’ current I-O dominance clearly offers an opportunity for Roche and AstraZeneca if their combination trials show efficacy,” Divan said.
Topping it all off is the fact that since Soriot has been touting the drugmaker’s cancer drug pipeline, some experts are thinking the company may again be ripe for another takeover offer. In fact late last month, Citi analyst Andrew Baum issued a note suggesting Novartis ($NVS) might see AstraZeneca as an enticing target, helping push the drugmaker’s share up 6% more.
At AstraZeneca’s earnings call a week later, Soriot faced buyout questions about a possible takeover attempt.
“As to whether we would be exposed, we certainly have been very aware over the last few years that as we create value then at some point our pipeline becomes attractive,” Soriot said during the call. “Hopefully, it becomes attractive to our shareholders but, of course, it may be attractive to anybody.”
All of this from a company that just saw it biggest seller, statin Crestor, fall off the patent cliff, leading it to make big job cuts in the U.S., as it tries to trim costs by $1.1 billion.
How much credit Soriot can take for the impressive share price move may be hard to evaluate, but investors are benefitting none-the-less. As fund manager Mahoney told Bloomberg, “It wouldn’t surprise me if the shares move up more from here. The pipeline is coming into view.’’
Aug 12, 2016