AstraZeneca a bid target again? CEO says someone may spot value

LONDON (Reuters) - AstraZeneca's AZN.L chief executive believes a rival could spot the growing value of its drug pipeline but declined to say on Thursday if the group was likely to be a takeover target once more, two years after seeing off a bid from Pfizer PFE.N.

A sign is seen at an AstraZeneca site in Macclesfield, central England May 19, 2014. REUTERS/Phil Noble/File Photo

This time speculation has moved to the idea of a possible offer from Swiss-based Novartis NOVN.S, which would increase its cancer drug operations significantly by acquiring its smaller British rival. It could also lead to cost savings.

The comments by AstraZeneca Chief Executive Pascal Soriot encouraged talk of another mega-deal in the pharmaceuticals sector, after a run of deal-making by companies seeking promising new medicines. This helped to send AstraZeneca shares to a record high on Thursday, breaching the 50 pound mark for the first time.

Citi analyst Andrew Baum suggested in a note this week that AstraZeneca’s biotech expertise and advanced immunotherapy cancer pipeline made it an attractive target for Basel-based Novartis.

AstraZeneca has a current market value of just over $80 billion, while Novartis is worth around $215 billion.

Reporting quarterly results on Thursday, Soriot said development of new drugs for cancer was now reaching a critical point, with important clinical data due in the next 12 months, which would be an inflection point for the company.

“As to whether we would be exposed (to a bid), we certainly have been very aware over the last few years that as we create value then at some point our pipeline becomes attractive,” he told analysts. “Hopefully, it becomes attractive to our shareholders but, of course, it may be attractive to anybody.”

Earlier, he told reporters he would not comment on “speculation or rumors or theories” about bid interest from Novartis or other companies. “A number of people will have those assumptions but we do not comment on those,” he said.

Novartis has substantial financial firepower and its CEO Joe Jimenez said last week he was ready to see the group’s AA- credit rating decline for the right M&A opportunity, though he also said he did not feel any pressure to do deals in the immunotherapy field.

He reiterated his readiness to look at sizeable deals in an interview published on Thursday.

“In addition to immuno-oncology, there is a whole series of other areas where acquisitions are possible, including immunology and generics,” Jimenez told Bilanz, a Swiss financial magazine. “A takeover worth more than $5 billion is possible, but in such a case the financial and strategic logic would have to be immediately clear.”

One question surrounding any potential move to acquire AstraZeneca is the stance of the British government, since new Prime Minister Theresa May has talked about developing a new industrial strategy, which could include defending important UK sectors such as pharmaceuticals.

The British drugmaker earlier reported a drop in profits due to generic competition to cholesterol fighter Crestor in the U.S. market, but it delivered encouraging growth in newer medicines.

The shares were 6.7 percent higher at 50.05 pounds by 1540 GMT, after hitting 50.38. AstraZeneca spurned a 55 pounds a share takeover offer from Pfizer in 2014. Novartis fell 1.8 percent.

AstraZeneca itself has made a number of bolt-on acquisitions to improve its new-drug pipeline in the past couple of years, although Soriot said this process was now effectively complete.

“We have a really full pipeline, so we would be extremely unlikely to consider a pipeline acquisition,” he said. “What we are looking to potentially do is acquisitions that are earnings accretive and are strategically aligned to our focus areas.”

Additional reporting by John Miller in Zurich; Editing by Adrian Croft and David Stamp