Astra alert over cheap drug rival By Geoff Foster
ASTRAZENECA’S investors must have felt sick as parrots as the UK’s number two drugmaker warned that revenue and earnings would drop this year due to the arrival of cheap generic rivals to Crestor, its blockbuster anti-cholesterol drug.
It sparked an avalanche of selling which saw the shares crash to 4059p before closing 269p, or 6pc down, at 4143p. Chief executive Pascal Soriot’s name was mud as many shareholders remember only too well the bullish revenue forecasts he plucked out of the sky after the board rejected Viagra maker Pfizer’s generous £69.4bn or £55-a- share takeover bid in 2014. The US bidder walked away following growing political concerns on both sides of the Atlantic over jobs and corporate tax manoeuvres.
Soriot then said in AZ’s defence of Pfizer’s offer that it ‘seriously undervalued the group and its prospects’. Its independent strategy ‘will create significant value for patients and shareholders’ and he hiked annual revenue forecasts to $43bn by 2023 – up from $25.7bn in 2013. AZ saw adjusted year-on-year revenue drop 7pc in 2015, to $24.7bn, while operating profit was down 1pc to $6.9bn.
The stock has fallen from a Pfizer-inspired peak of 4946p and following the warning looks in grave danger of falling back below £40 with the chances of it ever attaining the £55 a share offered on a plate by Pfizer, virtually zero.
AZ expects to see a trough in profits this year and next before a hoped-for resurgence on the back of a promising pipeline of experimental drugs. It will lose exclusivity on Crestor in May, and it is likely generic rivals will enter the market. Soriot said he is confident the group’s work on new experimental drugs will yield new income streams.
‘As we face the transitional period of patent expiry for Crestor in the US, we are confident that our strong execution on strategy, com- bined with benefits of focused investments and new launches, keeps us on track to return sustainable growth in line with our targets’, he said.
AZ proved a drag on a revitalised Footsie as was Coca-Cola HBC, 78p lower at 1322p. Barclays downgraded to underweight from equalweight on the growing risk of a devaluation of the Nigerian naira. The drinks giant derives 10pc of group sales and 9pc of earnings from Nigeria.
Overweight bears of the mining sector were sent packing as a slippage in the dollar triggered a strong overnight recovery in the oil price back above $35 a barrel. A weaker greenback makes oil cheaper for non-dollar buyers and it is also often seen as positive for commodity prices. Metal prices certainly bounced higher and the resultant strength in oversold miners helped the Footsie climb 61.62 points to 5898.76, while the FTSE 250 advanced 94.31 points to 16,086.73.
Wall Street edged higher on data showing the number of Americans filing for unemployment benefits rose more than expected last week and non-farm productivity fell in the fourth quarter at its fastest pace in more than a year. Yet many New York fund managers sat on their hands ahead of today’s crucial nonfarm payrolls (employment) figures.
Anglo American was the centre of attention in late trading as the shares rocketed to 342.7p before closing 54.6p better at 328.3p. Conspiracy theorists suggested the 20pc-plus gain was not entirely down to higher commodity prices, but something corporate could be on the horizon. It has been tipped as a takeover target before and with its market capitalisation now below £5bn compared to £31bn in 2011, a cash-rich predator could pounce before it sells its Brazilian interests. Glencore added 13.7p or 16pc to 99.68p.
South32, spun out of BHP Billiton last May, rose 6.25p to 53.25p after the miner decided to cut costs and production at its South Africa manganese operations, with 620 jobs axed and an expected 0.9m tons removed from the market. As a result of its writedowns of forecast commodity demand and prices, it now expects to book pre-tax, noncash charges of about £1.2bn in the half-year to December 2015.
A firmer oil price and revived takeover talk lifted Tullow Oil 17.8p to 179p.
Any stock where revered stock-picker Neil Woodford has a footprint is always worth closer scrutiny. Intellectual commercialisation group Imperial Innovations, in which his Woodford Patient Capital Trust owns 14.7pc, advanced to 435p and closed 20.5p higher at 420.5p.
It followed news that the company had raised £100m at 425p a pop, an impressive 8pc premium to the prevailing mid-market close on Wednesday. The 23.5m shares were placed by joint brokers Cenkos Securities and JP Morgan Cazenove.
Scrappy selling left Avanti Communications 14p off at 124p despite the satellite communications services company reducing its halfyear loss to £31m from £33m. ÷ THE management team at BCA Marketplace gave an upbeat presentation to N+1 Singer, following which it advised clients to buy. Shares in Europe’s largest used-vehicle marketplace improved 2.25p to 167.5p. The broker said it further underpinned its confidence in what is a compelling investment. The group is making the most of strengthening market growth plus a shift towards car auctions.