Pfizer finally admitted defeat in its quest to acquire AstraZeneca (LSE: AZN) (NYSE: AZN.US) earlier this week. However, with Pfizer backing off, investors are now starting to ask questions about Astra’s future prospects. Specifically, investors want to know if Astra can meet its growth targets set out by management in the company’s defence against the US pharmaceutical giant.
That said, there is some speculation that Pfizer might return for another attempt after the six-month cooling-off period, or three months if Astra’s management invites Pfizer back to the table. On the other hand, with so much political opposition to the original deal, it’s likely that Pfizer won’t return with another offer anytime soon.
Now that Astra has rebuffed Pfizer, the company is going to have its work cut out to meet the lofty growth targets set out by management.
Indeed, Astra’s management turned down Pfizer’s offer as they believed that the company has the potential to achieve better returns for investors over the long term. Astra’s management has forecast that the company’s sales will increase by more than 75% over the next decade, returning to 2013 levels by 2017.
There is no doubt that this forecast is optimistic and it is based on the success of a number of key drugs, which are currently under development. Actually, Astra is busy showcasing its emerging range of cancer drugs this week on a US roadshow.
One of the treatments under development, with the most potential, uses anti-PD-L1 antibodies to target cancer cells. Some scientists believe that this treatment could prove as transformational as HIV drugs have been in tackling Aids; redefining the way that cancer patients are treated.
Nevertheless, Astra’s forecasts are still just forecasts, and the company has to overcome some considerable barriers before it can market these potentially revolutionary drugs.
For example, many more clinical trials are required before these new treatments can be sold to the public and there is also stiff competition from peers, Bristol-Myers Squibb, Roche, Novartis and Merck & Co.
When considering the barriers Astra still has to overcome, many City analysts believe that the company’s revenue forecasts are too optimistic. Actually, the company is targeting peak annual sales higher than even the most bullish analysts expect. There is a lot of talk that forecasts were inflated to boost the defence against Pfizer.
One of Astra’s top shareholders is so doubtful of these forecasts that it has called for the company’s pay policy to be linked to the spurned £55 price.
All in all, Astra has some potentially revolutionary treatments under development, which, if brought to market successfully, could transform the company’s future.
Nevertheless, Astra still has a huge amount of work to do before these treatments get to market and the list of things that could go wrong is endless. What’s more, with legacy sales falling, Astra’s revenue is going to continue to slide until it gets these new treatments to market.
Still, the Astra/Pfizer saga may be over for now, but the UK's economic recovery continues.
There are no if's or but's about it, the economy is roaring back to life and so is the stock market. Indeed, the UK investment management industry has reported that equity funds have been the best-selling asset class for the past eleven consecutive months.
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Rupert does not own any share mentioned within this article.