AstraZeneca results show firm’s strength

AstraZeneca, which saw off a €95bn bid from Pfizer in May, said quarterly results showed its stand-alone strength, while recent US tax changes removed much of the case for a new takeover attempt.

Britain’s second biggest pharmaceutical firm raised its 2014 sales forecast for the second quarter in a row yesterday, helped by the delayed US launch of generic copies of Nexium, which kept cash flowing from the heartburn and ulcer drug.

It now expects sales to grow in low single digits at constant exchange rates this year, after previously predicting they would be flat. The upgrade follows better-than-expected revenue in the third quarter, helped by the Nexium factor.

Chief executive Pascal Soriot, who has fought hard to prove AstraZeneca does not need the kind of mega-merger offered by Pfizer, said he would use the better financial outlook to speed up investment in the company’s promising pipeline of new drugs. He also argued that US government tax changes undermined the rationale for companies to shift their tax bases overseas by striking so-called inversion deals, as Pfizer planned to do by buying AstraZeneca.

“The US rules have certainly raised the bar for tax inversions for all companies that are considering tax inverting. They almost entirely remove the tax benefits. It makes a tax inversion much less attractive.”

The collapse of AbbVie’s planned €44bn acquisition of Shire, in another deal driven by tax considerations, also highlighted the tax hazards, he added.

Pfizer has not revealed whether it would consider a new run at AstraZeneca but CEO Ian Read said last week he believed tax inversions could still be an option.

Under UK takeover rules, Pfizer can make a new public offer for AstraZeneca from November 26. Some investors think the US firm will return, while others are sceptical. “The likelihood of a bid has receded since the collapse of the AbbVie bid for Shire and the decision of Pfizer management to commence a $11bn (€8.8bn) share buyback programme,” Ketan Patel of Ecclesiastical Investment Management said.

Shares in AstraZeneca fell 1.8% yesterday afternoon, while the European healthcare sector lost 1.2%. Mr Soriot sought to reassure shareholders new investments would be managed carefully by predicting that earnings next year would be no worse than the lower end of the range expected for 2014.

The company will also get an upfront payment of $325m from Aegerion Pharmaceuticals, after agreeing to sell the US company its rare disease drug Myalept. AstraZeneca now expects “core” earnings per share,which exclude some items, to fall around 10% this year at constant rates. That is better than anticipated previously, but is offset by an anticipated currency hit of about 5%.



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