May 18, 2016
By Alex Keown, BioSpace.com Breaking News Staff
LONDON – AstraZeneca ’s Chief Executive Officer Pascal Soriot is looking to shake things up with a redesign of the company that has investors and some employees divided.
In an interview with Reuters, Soriot, who has helmed AstraZeneca since 2012, outlined his plans to overhaul the company with a focus on developing its pipeline, particularly in the area of oncology. That strategy became necessary after the company saw numerous drug patents expire, which caused a revenue drop of $17 billion beginning in 2011 and projected into 2017. With the shakeup, Soriot has a goal of AstraZeneca hitting revenue of $45 billion by 2023.
AstraZeneca is in the process of bolstering its pipeline through several deals, including a $575 million deal with Takeda Pharmaceutical to acquire that company’s core respiratory business, including global rights to roflumilast, a treatment for chronic obstructive pulmonary disease (COPD).
A big money-making drug is something AstraZeneca is looking for to meet its revenue goal of $45 billion by 2023. Acquiring new drugs through mergers and acquisitions will help the company offset declining revenues of drugs that are facing patent loss and increased generic competition, including the antacid Nexium and its heart drug Crestor. Last month, AstraZeneca received approval for Tagrisso, its new treatment for non-small lung cancer.
There have been some setbacks, with AstraZeneca halting a combination trial of durvalumab for lung cancer following reports of patients developing interstitial lung disease-like problems in one trial. But, at the same time, different trial data has shown that a combination of durvalumab and tremelimumab has potential in treating tumors that have not traditionally responded to other immunotherapy treatments.
In December, AstraZeneca was looking to bolster its oncology pipeline by acquiring the privately-held Acerta Pharma BV for more than $5 billion. Neither AstraZeneca nor Acerta have commented or confirmed the reports of the acquisition.
In addition to acquisitions, AstraZeneca is also divesting. Earlier this month the company sold the rights to Moventig (naloxegol) in Europe to ProStrakan Group, a subsidiary of Kyowa Hakko Kirin Co. Ltd. for $70 million.
Another change Soriot has spearheaded is the company’s move to a new campus in Cambridge, England. The new campus will place it near multiple academic institutions that could lead to potential collaborations. While the move to the new digs will not be completed for more than a year, Soriot told Reuters some staff members are already forming relationships with the academic community in Cambridge, and the results are paying off. He said those relationships are “fundamentally changing the way we operate.”
Such a move, which is accompanied by a planned $1.1 billion restructuring plan, is shaking things up at the company, but in a good way. Soriot said the hope is to streamline operations and bring new talent to a company that had seen little turnover of its employees. Turnover brings new ideas, something Soriot said was needed. This week, AstraZeneca terminated an unknown number of contract sales positions from Publicis Touchpoint Solutions.
Soriot announced the company was undergoing a restructuring plan to net savings of about $1.1 billion by the end of 2017. The restructuring plan will involve a $1.5 billion one-off restructuring charge, with total restructuring charges expected to be $2.4 billion through the end of 2017.
Soriot’s plan has its critics. Andy Smith, chief investment officer at fund manager Mann Bioinvest, told Reuters that Soriot’s plan has promised value, but it’s unknown if there is actual value in it. That criticism, as well as other concerns, lead the company earlier this year to link pay for Soriot and other executives to his goals. Shareholder concerns were increased after AstraZeneca forecasted that profits would likely decline this year as its cholesterol drug Crestor faces increased competition in the U.S. due to generics and newer medications.
Still, others think Soriot is on to something. Neil Woodford of Woodford Investment Management, the seventh-largest investor in AstraZeneca, has increased his stake due to his belief Soriot and the company are on the right track.
Soriot told Reuters that investors need some patience to see a turnaround of AstraZeneca stock, which is selling at $28.87 per share this morning.
