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Soriot to apply therapy to AstraZeneca

On 26th of April 2012 David Brennan stepped down as AstraZeneca’s CEO after 6 years in the job. David Brennan had risen through the ranks at AstraZeneca first at Astra and later after the merger with ICI spin-off Zeneca. Brennan had been criticised by investors for failing to sure up the companies pipeline as a wave of patents expired. Yet, when Brennan announced he was leaving, AstraZeneca’s share price fell dramatically and took nearly two months to recover.

Under interim CEO Simon Lowth, AstraZeneca has begun some corrective action to address the diminishing outlook of AstraZeneca, given the potential for a 50% decline in its business throughout its patent cliff. For this, Lowth has certainly gained some plaudits in his brief time in-charge. Most notably, Lowth has presided over the Amylin acquisition and seen a surge in the AstraZeneca share price to almost a 12 month high, albeit markets generally are performing better than a year ago.

With yesterday’s announcement (28/08/2012) that Mr. Pascal Soriot is to succeed David Brennan as AstraZeneca’s next CEO, Lowth is to step down on the 1st of October 2012. Some analysts were surprised to see that Lowth was overlooked for the job and it will be interesting to see whether he was interviewed at all, or why he perhaps was deemed unsuitable for the permanent post. Mr. Lowth will be going back to being the company’s CFO, unless he perhaps has got a taste for the role of CEO, in which case we could expect him to spring up somewhere else soon.

So what do we know about Pascal Soriot and will he be good for AstraZeneca?

Mr Soriot certainly has an impressive CV as the former CEO of Genentech, Head of Pharmaceuticals at Roche, COO at Aventis USA (Later Sanofi Aventis) and an MBA from HEC Paris to go with the experience. AstraZeneca chairman, Leif Johansson, said that the main benefit of Mr Soriot’s experience is that he has previously run a global pharmaceutical division about the same size as AstraZeneca. Mr Soriot was highly regarded at Roche and he sat on the corporate executive committee. When the deal was announced Roche’s share price fell almost 1%, coincidently AstraZenca’s share price also fell around 0.5%, so perhaps not indicative of strong investor sentiment in either case.

Mr. Soriot has chosen to assume one of the toughest jobs in the pharmaceutical arena. It is a well-known fact that AstraZeneca has and will be hit hard from patent expirations. Soriot’s predecessor, Brennan, had previously eschewed major purchases saying the company wouldn’t consider any deals on the scale of the MedImmune purchase. Industry analysts believe that Mr. Soriot will continue this strategy but given this didn’t pan out too well for Brennan, maybe Mr Soriot will feel a bolder approach is required. One area where AstraZeneca has failed to capitalise is in the biologics arena, despite the MedImmune investment the company has not been able to transform its fortunes through a strong biologics product pipeline.

Big pharma remains focused on small to medium bolt-on acquisitions, strategically picked to bring innovative products and technology to their respective businesses. It is likely AstraZeneca will follow suit and continue to seek similar deals to its recent Amylin purchase, albeit a little less complex perhaps. Mr. Soirot, coming from Roche, will not necessarily bring a mega-merger acquisition mind-set, despite the inevitable rumours that will persist. GSK are constantly linked with AstraZeneca but GSK’s Andrew Witty has attempted to distance them from a mega-merger with AstraZeneca. It would seem at the heart of their strategy will be a need to find companies with strong R&D innovation at their core, therapeutically relevant to AstraZeneca experience and strategy, with a strong pipeline of prospects that will benefit from AstraZeneca’s development expertise and marketing capabilities. Above all though, perhaps Soirot will set about changing the culture of AstraZeneca. He certainly can’t make it become Genentech over-night, or ever. Yet some of those innovating principals might just begin a transformation, unlocking the potential from within, while seeking sensible deals outside.

So Mr. Soriot certainly has his work cut out when he starts on the 1st of October. His first aim would seem to be to arrest AstraZeneca inexorable decline, restore investor confidence by mapping out a clear and executable strategy, and set to work on bringing focus to AstraZeneca’s core assets, while deciding where to buy more. It is certainly going to be tough job to right the listing ship, but at least they have a Captain, now we’ll see if the company, and the market, wish to follow.

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