AstraZeneca in 'serious trouble', say analysts

By Kirsty Barnes

- Last updated on GMT

Related tags: Astrazeneca

An analyst report released yesterday identified AstraZeneca as
being in 'serious trouble' and branded it as potentially
the 'worst [large cap] performer in [the] entire sector'
over the next eight years.

Between now and 2015, analysts at Dresdner Kleinwort predict an abysmal, or negative sales growth for AstraZeneca, believing it will only manage to edge sales forward less than 1 per cent at best and may see a sales decline of 3 per cent in a "worst case"​ scenario. "The worst case scenario, in our view, is not a blue sky scenario, but is one that needs to be seriously considered… [it] has a 50% probability of occurring",​ the analysts wrote in a report released yesterday. AstraZeneca told that it would not comment on analyst reports: "They are entitled to their opinion and we will have to wait and see,"​ the spokesperson said. The analysts said they based their estimations on the significant risk hanging over the pharma giant's three major top line sales generators, which will be exposed to generic vultures in the near future, as part of a total of eight patent expiries due over the next eight years for brands representing 60 per cent of current sales. "The best case assumes that eight products become exposed to patent expiry up to 2015… The worst case assumes that generics hit Nexium (esomeprazole) and Seroquel (quetiapine) in 2008 and Crestor (rosuvastatin calcium)in 2009",​ the analysts wrote. Dresdner Kleinwort also expressed concern over the fact that AstraZeneca only has eight significant products on the horizon, slated for launch from 2009 onwards. Out of these, only half were even deemed suitable by the analysts for inclusion in their financial forecast. The analysts valued the average peak sales potential for each product at $1.5bn and said: "Unfortunately, the remaining product pipeline cannot replace lost sales and whereas other pharmaceutical players will experience generic losses, none will be as deep or for as prolonged as they are for AstraZeneca",​ they wrote. Meanwhile, Dresdner Kleinwort's worst case scenario also assumes that one of AstraZeneca's most prominent new products, saxagliptin, "fails to gain [marketing] approval based on safety grounds".​ It therefore was not included in the analysts' sales forecast. Saxagliptin is a dipeptidylpeptidase IV (DPPIV) inhibitor being co-developed with Bristol-Myers Squibb (BMS) and is potentially due for launch as of 2009. However, a rival DPPIV inhibitor, Novartis' Galvus (vildagliptin) has recently been associated with a dose-related impact on liver enzyme levels and Novartis has sought label revisions over the potential liver toxicity with a once-daily formulation of the drug. Because there is a "striking similarity between Galvus and saxagliptin," structurally and mechanistically, the analysts fear that "the liver safety issue developing for Galvus could be a problem for saxagliptin".​ Meanwhile, in terms of merger and acquisition (M&A) activity, Dresdner Kleinwort believes that any potential acquirer" would need to consider the huge generic risks to the pipeline… Any acquisition valuation has to consider the significant downside".

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