The downbeat performance may also reflect other worries. Soriot is confident the UK-listed group is on track to reach revenue of $80 billion by 2030 and that it can keep growing after that. Analysts polled by Visible Alpha agree he can hit his 2030 target, but they also expect a steep drop-off after that as blockbuster drugs lose exclusivity. Sales are expected to fall by $10 billion between 2031 and 2035.
That "patent cliff", and some disappointing clinical trials, is probably why AstraZeneca's forward price-to-earnings multiple has plummeted from over 20 earlier this year to just 15. The company now lags behind Novartis and Roche, two rivals it has historically outperformed.
Blocked deal talk dents investor sentiment
There are few pharma CEOs that can match Pascal Soriot’s track record. The French-born boss took over AstraZeneca in 2012, when the business was facing a painful loss of exclusivity on key drugs and a weak pipeline of future medicines. But in the years since, he fended off an audacious bid from Pfizer and transformed the business into the most highly valued European drugmaker. Now the spectre of another patent cliff and investor skepticism about mega M&A mean the 67-year-old CEO may need to prove himself all over again.
The 9% decline faced by AstraZeneca's stock the day after The Financial Times reported it was in talks with Bristol Myers Squibb was a clear thumbs down from investors on the potential deal. A $380 billion combination with a rival drugmaker facing its own challenges certainly seemed risky. Yet with the deal now seemingly dead, AstraZeneca's share price is still down over 4% from the day before the report.
M&A options remain, but competition is fierce
That suggests that buying more drugs, through M&A, is probably on the cards. Soriot may think twice about another mega deal unless his investors warm to the idea. An alternative option is to pursue smaller takeovers in areas like antibody drug conjugates, which act as a kind of super chemotherapy, as well as metabolic diseases like obesity and liver disease.
The good news is that AstraZeneca has a clean balance sheet and plenty of firepower: gearing up to, say, three times EBITDA would enable deals worth nearly €50 billion. The bad news is that competition is rife, given rivals like Pfizer, GSK and Novo Nordisk are also on the hunt to fill their pipelines. Pfizer paid a whopping 159% premium for Metsera last year after a tense bidding war with Novo Nordisk. AstraZeneca may face a similar battle if it targets digestible biotechs in the oncology and rare disease space where its rivals are also expanding.
Soriot's record still supports the case for more
Soriot may fancy another revamp. Besides the BMS deal, he has a solid record for takeovers, such as the $39 billion deal for Alexion in 2021. And under his watch AstraZeneca has invested successfully in researching new drugs in-house, like lung cancer medication Tagrisso.
Despite his 14-year tenure, Soriot has quashed suggestions he might stand down soon. That's good, because it may well take some time for AstraZeneca to recover its lost glory.
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