Can AstraZeneca continue to swear off major M&A?

Can AstraZeneca ($AZN) CEO David Brennan stick to his no-megadeals diet? Analysts are beginning to wonder, says Bloomberg, now that three of the company's promising drug candidates have stumbled. The company was counting on revenue from those drugs to shore up erosion from generic competition. Now, what's going to take the place of, say, Seroquel sales if not some bought-in products?

Brennan has reiterated his "no megadeals" pledge as often as an Atkins aficionado talks about avoiding carbs. He mentioned it again in a Q&A that published earlier this week; "not a fan" were the three words he used to describe his aversion to hefty M&A. Willpower and self-control are admirable, no doubt, but as Credit Suisse's Luisa Hector told Bloomberg, "they are gradually running out of options."

Seroquel's patent expires in March, and that's AstraZeneca's second-biggest seller. Nexium, the little purple pill that brings in more than $4 billion a year, goes off patent in 2014. Together, the two meds probably added up to $10 billion in 2011 revenues, Bloomberg figures. Crestor, its blockbuster statin drug, still has patent protection, but it faces competition from generic Lipitor, and a new study that AZ hoped would prove Crestor superior than the Pfizer ($PFE) drug didn't pan out as expected.

The up-and-comers that were supposed to help fill these gaps include an ovarian cancer drug (terminated last month), the diabetes treatment dapagliflozin (which needs more data, possibly more study, FDA now says), and a potential antidepressant that fumbled a late-stage study. So, says Fitch Ratings' Britta Holt, "It may be tempting for the company to fill the upcoming sales gaps with the help of medium-sized to larger acquisition," even if that means losing its AA- credit rating. And as JPMorgan's Alexandra Hauber wrote in an investor note (as quoted by Bloomberg): "With the prospect of a potentially decade-long decline in operating profit, management may resort to a sizable acquisition." Of course, it's one thing to dangle an M&A menu in front of Brennan's face, and another for the man to place an order.

- read the Bloomberg piece