Great Britain

AstraZeneca may be done with vaccines. That’s sad but not surprising

AstraZeneca might have trebled its Covid vaccine sales to $894m (£640m) in the second quarter of 2021 when compared with the first, but that’s a mere pinprick compared to what Pfizer’s is turning over.

The American group raised its full year forecast for the sales of its rival treatment to $33.5bn when it delivered its second-quarter results. By contrast to Astra’s jab, its far pricier treatment is being sold on commercial terms.

However, the Astra/Oxford vaccine might not be an AstraZeneca product for much longer. When I spoke, via email, to Shore Capital’s healthcare analyst Adam Barker on the morning of its results, he said he wasn’t convinced the company would keep the treatment.

While nothing has been decided, he told the newswire, that sort of talk on the record from a senior executive is usual a sure sign that change is coming.

Astra did the world a solid when it partnered with Oxford University and agreed to offer the jab developed by the latter’s scientists at cost through the course of the pandemic to rich countries, and beyond it to low- and middle-income nations.

Unfortunately, it then got caught up in some low politics, including a damaging spat with the EU over supplies, during which time French president Emmanuel Macron made some frankly disgraceful comments about the treatment’s efficacy, which weren’t backed by anything resembling science. Sadly, Macron wasn’t alone.

Subsequent research linking the treatment to extremely rare blood clots – much rarer than those caused by Covid as it has turned out – didn’t help.

“AstraZeneca might have expected to have earned the world’s gratitude for its not for profit stance. Instead, concerns about the vaccine’s safety stubbornly persist, hampering the take-up in parts of the world that should have benefitted the most,” said Danni Hewson, AJ Bell’s financial analyst, neatly summing up the problem.

While Astra’s management of the situation didn’t always help its cause, the group has been far more sinned against than sinner.

Pfizer’s expensive treatment, requiring ultra-cold storage, has become the cool kid of the vaccination world while Astra’s cut-price Covid killer, which requires only a normal fridge, languishes at the back of the class for no good reason.

Here’s the thing: by contrast to Pfizer, AstraZeneca is not a big player in vaccines. It specialises in cancer treatments, cardiovascular, respiratory and metabolic meds. The recent “transformational” acquisition of Alexion, which develops treatments for rare conditions, provides another string to its bow.

Total revenue of $8.22bn for the three months to June beat the analysts’ consensus forecast of $7.58bn, although its earnings were a little shy of it. Nonetheless, the results were very solid.

Barker describes the company as “the best example of an R&D turnaround in the pharma industry in recent years”. He highlights CEO Pascal Soriot’s faith in the group’s oncology pipeline which has delivered drugs such as Tagrisso, Lynparza and Imfinzi.

The performance of the shares justifies that argument. You may remember that back in 2014, the aforementioned Pfizer said it would be willing to pay £55 a share for the company, only for that to be decisively rejected by Astra’s board.

The bid was highly controversial. It was fiercely opposed by unions and became a political football, with concerns raised over what it might mean for the UK’s strong position in pharmaceuticals, identified as a key sector by former prime minister David Cameron

But Soriot’s decision to hold firm against it left him facing rumblings of discontent from some of his investors. On the day Pfizer was told to go home, the shares took an 11 per cent tumble to £42.87, leaving the company’s value £11bn shy of what Pfizer had proposed to pay.

The Guardian at the time reported a top ten shareholder describing this as “the single biggest case of value destruction on behalf of shareholders of all time”. Fund manager Jupiter went on record to chide the board for failing to engage with Pfizer.

Things look very different now. Had you invested at the closing price back then, you’d have nearly doubled your money, based on the £82-plus Astra’s shares fetch today.

To be fair, the dashing of Pfizer’s takeover ambitions didn’t stop it from from thriving too. Its shares have improved by 56 per cent over the same period. But Astra boasts the fancier rating, a good indicator that investors expect it to grow faster.

It has become something of a prancing pony. There is a lesson there for weak-willed boards and London’s myopic money managers, both of which have proved far too willing to sell off good companies far too cheaply (cough, Morrisons, cough).

As for the vaccine business Astra doesn’t need to be in? The world may have cause to regret it if it does decide to bail on the sector. There will be another pandemic along. Environmental destruction, modern travel, the ability of viruses to mutate and jump from species to species, makes it an inevitability.

Is anyone going to be willing to produce vaccines at cost price for distribution around the world if and when this happens again? Doubtful.

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