AstraZeneca unveils rosy forecast to persuade investors it's better off alone

AstraZeneca CEO Pascal Soriot

Now, it's AstraZeneca's turn to tick off all the reasons why it shouldn't sell to Pfizer ($PFE). And it's a long-term list. A decade long, in fact. Between new plans for existing products and its prospects for new ones, AstraZeneca will boost sales to $45 billion by 2023--about $20 billion higher than they are now. 

Of course, all that growth will follow some shrinkage in the near future, because AstraZeneca's ($AZN) patent cliff isn't over. Nexium, the blockbuster stomach drug, gets generic competition next month, and its powerful statin drug Crestor falls off patent in 2016.

So, in essence, the argument is this: If investors will just be patient, they'll find the payoff is a lot bigger from an independent AstraZeneca than from a Pfizer that has swallowed it up.

"AstraZeneca is completing its transformation," CEO Pascal Soriot said in a statement, citing the "significant commercial potential" of its pipeline. "We are continuing to create significant value for shareholders from our independent strategy." Chairman Leif Johansson hammered the point home: "The increasingly visible success of our independent strategy highlights the future prospects for our shareholders." And make no mistake, he said. The payoff should go to AZ's shareholders, not Pfizer's.

Valid or no? Let's take a look at some of the individual line items. Brilinta, for instance. The blood thinner, approved in 2011, has struggled to gain traction in a crowded market. But when he took over as CEO, Soriot saw a diamond in the rough and has plowed ad money and sales resources into the product. The investment has paid off--at least somewhat. First-quarter sales were up 94% year over year--to just $99 million.

At that rate, could Brilinta hit $3.5 billion by 2023 as the company now says? With a hoped-for approval in peripheral artery disease, and more supporting data in ACS patients, it might have a shot. Four new studies are coming out by 2017. In Europe, the company is grabbing new market share. And before the drug was first approved, analysts expected $2.7 billion in sales.

But Brilinta has a lot of competition, particularly generic versions of Sanofi ($SNY) and Bristol-Myers Squibb's ($BMY) Plavix. And there's a reason why Brilinta's European growth is outpacing that in the U.S. The Justice Department is investigating Brilinta marketing--a probe that threw a big wrench in the U.S. marketing push and could have serious implications in the long run. At least one analyst has suggested that DoJ might force the drug off the market.

So, that $3.5 billion forecast rests on a lot of Ifs. The same might be said for the rest of AstraZeneca's forecast Tuesday. The long-term risks are greater than the company seems to imply.

Will the company's new diabetes drug Farxiga/Forxiga really be able to help pump diabetes sales up to $8 billion after head-to-head rivals get going? Will the proposed diabetes combo drug that comprises saxagliptin and dapagliflozin really take off? Can AstraZeneca's respiratory franchise keep growing after Symbicort generics hit? 

Analysts see the forecasts as a bit rosy. And the pipeline promises are far from certain, Berenberg Bank analyst Alistair Campbell said; in fact, those promises may not even justify AstraZeneca's current share price.

"This is a company that has made significant progress in moving its pipeline forward over the last 18 months," he said (as quoted by Reuters). "Is it enough on a fundamental basis to justify the current share price? Personally, I don't think so--at least not without the certainty you need in terms of knowing clinical trial outcomes."

The fact is, long-term forecasting is a dicey proposition. Pfizer's short-term cost cuts might look a lot better to investors who aren't necessarily in it for the long haul. If Pfizer does succeed in buying AstraZeneca--and bringing down the ax on AstraZeneca's jobs and facilities--the result may indeed be less fertile than AstraZeneca could be independently. The question is whether shareholders will be willing to wait.

- read the AZ release
- check out the Reuters story

Special Reports: Top 10 Drug Launch Disasters - Brilinta | Top 10 pharma companies by 2013 revenue - AstraZeneca | Top 10 largest pharma layoffs in 2013 - AstraZeneca

Editor's note: This story was revised to note that Brilinta is indeed approved to treat ACS patients.