LONDON AstraZeneca (AZN.L) has suspended its share buyback program, giving its new chief executive room to step up investment and make acquisitions as he draws up a plan for returning the Anglo-Swedish drugmaker to growth.
The company, which has suffered a string of clinical trial failures and faces patent expiries, said on Monday it was halting the program after buying back shares worth $2.3 billion of its initial target of $4.5 billion.
Shares in AstraZeneca fell as much as 2.7 percent following the announcement. They were trading 1.4 percent lower at 2,913 pence by 1505 GMT, the biggest decline on the UK's benchmark FTSE 100 .FTSE index.
The company, however, maintained its core earnings target for the full year at between $6 and $6.30 per share.
Chief Executive Pascal Soriot, who was previously at rival Roche Holding ROG.VX, started at AstraZeneca on Monday.
"As I assume my new responsibilities at AstraZeneca, I believe this is a prudent step that maintains flexibility while the board and I complete the company's ongoing annual strategy update," he said in a statement.
An AstraZeneca spokeswoman said the board could decide to resume the buybacks or it could identify other opportunities for business investment, such as acquisitions or in its own pipeline.
"It's about maintaining some flexibility from a financial point of view," she said.
Analysts said when Soriot's appointment was announced in August that he needed to make significant changes to restore the company's fortunes.
He has no time to waste, given a number of AstraZeneca's biggest selling drugs lose exclusivity over the next few years, and it has little in its pipeline of medicines in late-stage clinical trials to replace them.
Its blockbusters Nexium, a heartburn medicine, and heart drug Crestor lose patent protection in 2014 and 2016 respectively, while anti-psychotic drug Seroquel lost patent protection earlier this year.
Shore Capital analyst Brian White said suspending the buybacks would give Soriot maximum flexibility from day one.
"Our view is the company has a window of opportunity over the next two to four years, when Nexium and Crestor are genericised, to use the cash flows from those products to get out there and bolster the pipeline," he said.
"And they have to maximize the firepower that the new CEO has (to do that)."
(Additional reporting by Brenton Cordeiro in Bangalore; Editing by Saumyadeb Chakrabarty and Mark Potter)