Big Decisions for Incoming AstraZeneca PLC (AZN) CEO - M&A Pressure Hits
9/27/2012 7:52:13 AM
Pascal Soriot doesn’t start as AstraZeneca’s new CEO until Monday, yet everyone seems to know what he should do first: go shopping. The problems soon to be faced by the former Genentech CEO are well known. AstraZeneca is heading towards the steepest of patent cliffs and has so far failed to find anything in the R&D labs that might cushion its fall. Drugs losing US patent protection by 2015 account for a more than a fifth of its sales, rising to nearly a third of sales by 2019. Recent launches of diabetes and heart disease pills have fallen short and what’s in the late-stage pipeline (arthritis, constipation and gout, since you ask) is considered quite likely to fail. What AstraZeneca does have is cash — around $3bn net at the end of 2011, which will likely rise to $13bn or thereabouts by 2018. Squeeze the balance sheet a bit and that gives Soriot an acquistion budget of $15-20bn without tampering with the dividend. The problem is, what should he go for? Analysts at Leerink Swann reckon he should buy Forest Laboratories (FRX), the New York City-based maker of treatments for anxiety and alcoholism.