AstraZeneca has been one of the companies hardest hit by generic competition as pharmaceutical companies lose patent protection in a wave of expirations known as the “patent cliff.”The company has seen its exclusivity end on blockbuster drug Seroquel which had upwards of $4 billion in sales in the United States alone last year.
Now the company finds itself rapidly losing sales, and will see Nexium ($6.2 billion in US sales) expire in 2014 and Crestor ($4.4 billion in US sales) end in 2016, without obvious candidates to replace them.
All of that combined forced out former CEO David Brennan on June 1st.
Now Reuters reports that they’ve found a replacement in former Roche COO Pascal Soriot.
Soriot will have to find out a way to both cut costs and bolster AstraZeneca’s bare late stage pipeline via acquisition.
He has some particularly big challenges ahead:
AstraZeneca has a great deal of ground to make up
Reflecting its particularly bad patent situation and weak pipeline, AstraZeneca trades at the lowest valuation among big pharmaceutical companies.
It has made a number of acquisitions over the last couple of years, but none of the sort of big deals that could conceivably make up for patent losses. It’s already an extremely competitive buyout environment.
The era of the blockbuster drug is over
Pharmaceutical companies have spent years and many billions trying to create the next generation of blockbusters like Lipitor and Plavix. They have not been successful. For the future they’re looking to smaller, more targeted biotechnology drugs.
Reforming drug development takes time
It takes years to bring a drug to market. No matter how drastically Soriot reforms Astra Zeneca’s research and development programs, it will take years to bear fruit.
Short term measures, like licensing agreements, partnerships, and acquisitions can help, but it will be very difficult for them to make up for large revenue losses from the patent cliff.
The appointment of Soriot over interim head Simon Lowth, the firm’s former CFO, suggests a renewed focus on those issues.
Soriot’s expertise is in development — where AstraZeneca has had a number of high-profile failures — and in biotechnology, one of the fastest-growing and newest areas of pharmaceutical research.
He also oversaw the successful integration of Genentech into Roche, in one of the largest acquisitions the industry has ever seen.
AstraZeneca is not currently in a position to buy a Genentech, so Soriot will have reform his own company and build through smaller bolt-on acquisitions. He has quite a job ahead of him.
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