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Chaos at AstraZeneca

What on earth is going on over at AstraZeneca? The company has had plenty of wild ups and downs over the years, and managed to fight off a takeover attempt by Pfizer (and who else has managed that?) But in doing so, they made some pretty strong revenue projections (look what we’ll do if Pfizer doesn’t ruin it). The shareholders, especially the big institutional ones, took note of these markers, and management knew that they wouldn’t forget.

The company’s big push recently has been in immuno-oncology, which is certainly a field with plenty of revenue potential (and a lot of unsettled clinical science). AZN investors have been waiting for the results of the MYSTIC trial, which is testing the company’s durvalamab against non-small cell lung cancer in combination with their CTLA4 antibody. That’s the therapeutic area where Bristol-Myers Squibb’s Opdivo ran trouble, compared to Merck’s Keytruda, and the optimistic case has been that AstraZeneca, considered to be behind, has been able to benefit from all that turmoil and has positioned itself to come up with much better results that will move it (and its drugs) into the front ranks.

Nervousness about this thesis creeps up, however. Last month, CEO Pascal Soriot made some headlines when he spoke about how AstraZeneca would indeed be in trouble if MYSTIC failed to deliver. He sounded, in fact, like someone trying to prepare people for this possibility, and for the possibility that the company might find itself a takeover target again (this time, presumably, in a more disadvantaged position as well). That didn’t make anyone happy, it’s safe to say, but investors now have something to really ponder on: an Israeli newspaper reported last night that Soriot is leaving AstraZeneca entirely to become CEO of Teva. Importantly, both companies quickly came out with statements on the rumor, but importantly, those statements were. . . “No comment”.

Oops. So if Soriot really is leaving, and that sure makes it sound like he is, then what does that say about MYSTIC, and AstraZeneca’s prospects in general? The trial results have surely not been unblinded, but this does sound like a vote of no confidence in the whole effort. I can only imagine what people at the company are thinking today – it’s not going to be one of those high scientific productivity days, you can bet. Actually, there have been several days like that in the last couple of months, since Luke Miels left a high post at the company to join GSK and the dispute over his departure spilled over into the courts.

We’ll see what happens. MYSTIC might surprise, you never know. But “you never know” is not a good basis on which to run a company – and right now, we don’t know who’s going to be running this one.

45 comments on “Chaos at AstraZeneca”

  1. Isidore says:

    I believe the AZ CEO’s surname is spelled Soriot and not Soirot.

    1. Eric says:

      Indeed, and normally pronounced something like Sorry-oh

  2. Phil says:

    And while we’re copy editing Derek’s blog, Miels has an `s’ at the end.

    1. Isidore says:

      We are pointing out the typos since the content is good and accurate.

      1. Derek Lowe says:

        Oh, I have no problem with that. I do that sort of thing (typos) fairly often, and fix them as soon as possible. My brain decides how to spell something, and sticks with it for better or worse. I had to head out the door right after writing this morning’s post, and didn’t get a chance to fix things until now.

        1. gippgig says:

          I once e-mailed you a list of corrections to an entry, never heard anything further, & didn’t do it any more. Should I?
          P.S. – at the bottom it had seven (box) = 4 (no operation symbol!) (did this several times)

          1. Derek Lowe says:

            Hmm – did I make the corrections? Sometimes I get swamped on the e-mail, but that is the way to do it. Sorry about that!

        2. gippgig says:

          The corrections weren’t made (Nitration Isn’t So Simple).

          1. Derek Lowe says:

            Found your email from December, and I actually made the corrections (at last). I think this one went into the “I’ll do this tonight” file when I got it!

  3. William Gerber says:

    Would love to read an article “Clues to look for that your double blinded trial is failing prior to unblinding.”

    1. Ian Malone says:

      If a trial is wildly successful it’s self-unblinding. Double blinding means the patients and the people they’re interacting with (clinicians, people measuring outcomes) are blind to whether they’re on the new treatment or existing/placebo. But they’re not blind to outcomes and if your drug is working really well then you’ll see the difference before you unblind. If everyone looks pretty much like the normal disease course then your effect size is quite small (relative to the normal variance). You do still need to unblind to actually prove it, particularly if even a small effect is going to be clinically significant.

      1. NJBiologist says:

        The same is also true for adverse events/major toxicities: if the rate in the clinical trial population exceeds the rate for the general population, the compound is likely to have issues. This actually happened at a company near me… a brokerage firm got information on an AE out about two months before management discussed it. Yikes.

  4. bhip says:

    No idea if MYSTIC will be successful. That said, going after PD-L1 vs. the PD-1 receptor (which is also activated by PD-L2 which also expressed by tumors) does not seem sensible…

    1. Checkpoint guy says:

      And PD-L1 is both expressed at much higher levels and internalizes at a much higher rate than does PD-1. The dose required to cover PD-L1 is much, much higher than to cover PD-1 with this difference surely playing out clinically.

  5. CP says:

    This is not necessarily Soriot-focused, more along the Mystic-thread but it’s a bit weird – large enterprises are supposed to diversify to spread risk. Small companies are the “bet the farm” test bed. Big companies acquire small companies but again, in a portfolio of diversification. Now (last few years) we have large companies like BMS and AZ and I think others that are shifting staff and reorganizing internally around an (immuno) oncology to the detriment of other therapeutic areas. There was a recent article in FT https://www.ft.com/contenU00092dde-578c-11 e7-9fed-c19e2700005f discussing the 800+ IO trials underway and the loss of scientific rigor – that it is a gold rush.

    Interested in how this forum thinks about that.

  6. oldnuke says:

    They just sold their US HQ in Wilmington for $50M and are shrinking their footprint to two buildings which they will lease.

  7. Calvin says:

    Ahh AZ. This is one epic failure of a company. The last 15 years or so have been a continuing story of repeated failure. Other than Brillinta, until recently they’d not go anything through P3 for about a decade. While Olaparinib has gone on to be successful that was more a result of the Kudos group (who discovered it and were promptly fired for their troubles) telling them that their original clinical trial was nonsense and they should run it again properly (AZ initially ended the programme and wrote off the asset for a few hundred million before realizing their mistake). They basically fired all the people/groups who had a track record of discovering, developing and launching drugs. And then randomly decided that they’d move everything to Cambridge UK because it was shiny (not withstanding that AZ Alderley had done a great job of closing other sites to save itself). And then there’s the disaster of Medimmune who were bought for a massive premium in 2007 and since then have launched pretty much nothing despite huge investment. It’s a basket case of a company. I’ve heard that Pasal and Mene are epic micro-managers and so people jump ship if and when they can. There are some good people there but they are overwhelmed by the crap around them. I’ve heard that Pascal is definitely going but the deal is not quite done. Make of that what you will. But the whole thing is such a mess, who’d want to buy them after this. I’m sure Pfizer will come back with a pile of cash, but less cash than before….

    1. Hap says:

      I thought Pfizer wanted AZ for tax avoidance – if they can’t invert the taxes (because the IRS probably won’t let them) then what’s the point? (And, if that’s true, then AZ’s investors probably got hosed, because AZ management made promises they couldn’t deliver and no one else is going pay them nearly as much as the Borg would have.)

      1. Calvin says:

        That might still be the case to some extent because they have lots of offshore cash to use, somehow. So while not an inversion, it might be tax efficient in some way. I’m sure the Borg would have some reason to justify the move. And AZ’s negotiating hand just got weaker….

    2. Patty says:

      I think you do not have everything right, I am in AZ not long and maybe not for long but I don’t think you have the strategic vision right.

  8. Smythe says:

    So, failed to deliver at AZ, flees the sinking ship, and signs on at Teva for a $20m bonus (according to the story linked).

    Must be nice being a CEO…

  9. azer says:

    Speaking as a current AZ employee, I can report that I have not seen anyone throwing themselves out of windows, crying in the halls or stealing office stationary (more than usual). In fact it looks like a pretty normal day at work. The report is being treated by upper management as an unfounded rumour, not worth discussing – we’ll see how that turns out, but personally I wouldn’t be piling on publicly on the company based on one report from an obscure Israeli business journal. And frankly I don’t see how it makes sense that Soriot would switch at this precise moment from being CEO of a top tier research pharma to that of a 3rd rate generic company (and one that has gotten through 4 CEOs in 3 years) – it would be total career suicide. Anyone that heavily invested in the company’s turnaround would at least wait until the Mystic results come out before making a move.

    1. Derek Lowe says:

      AstraZeneca could take care of the entire issue in five seconds by denying the report, you know. Instead, they seem content to watch $4 billion dollars of their market cap disappear.

      1. azer says:

        Management’s line, FWIW, is “we don’t respond to rumours as this would create precedent”. Am not saying that makes sense, but in any case that’s their line and they’re sticking to it.

        1. Wavefunction says:

          Management is afraid of creating a precedent for squashing rumors? Yes, that doesn’t make sense to me.

          1. Chris says:

            A precedent of quashing rumors is a de facto confirmation if you then refuse to quash a rumor later. Cubist had a long standing policy of saying nothing about buyout rumors for that reason.

      2. Chris (II) says:

        Here’s Soriot himself on rumours in employee memo:

        “Given the volume of coverage, I want to take a moment to explain why we did not issue internal or external communications in this matter,” Soriot wrote in the note to staff, signed with his first name. The company has a long-standing policy of not addressing speculation unless required to do so by regulators, as in the case of Pfizer’s interest, he said. Rumors are “part of everyday business” and responding to one would require responding to all, he said.

        https://www.bloomberg.com/news/articles/2017-07-20/soriot-breaks-silence-on-reported-astra-exit-in-an-internal-memo

    2. Hap says:

      If the report is correct, 20 million reasons.

      If he can’t deliver on his promises (and it was already pretty likely that he couldn’t) then he will be less hireable elsewhere (though Teva should have factored that possibility into their hiring). Shareholders could sue if they think he hosed them wherever he works, though leaving AZ makes it more likely that AZ wouldn’t cover his bottom (AZ might reveal stuff to try and save themselves at his expense).

      Would he going to stay long enough at Teva to be worth it to Teva?

    3. Hap says:

      Would non-compete agreements allow him to work at another big pharma? Since Teva is generic, he might be able to work there without triggering one.

    4. Seekthetruth says:

      LOL, spoken like a true AZer who is drinking the Kool-Aid. AZ management’s attitude has always been to avoid being transparent about anything unless they are forced to do so, which only feeds employee anxiety and the rumor mill. If there wasn’t an ounce of validity to Frenchie’s departure, AZ would have already come out and denied it- remaining silent on this topic while their market shares tank is foolish- there must be some truth to the article. Without a successful result from Mystic, Frenchie knows his days are numbered anyway, and money talks- a 20 million dollar signing bonus plus double the $5.7M salary his predecessor received- is a hell of a lot more than AZ gave him. I don’t know how long you’ve been at AZ, but you should see the signs and start looking for other opportunities. Last week they sell the site so they can lease it back for an undisclosed amount of time, this week reports that Frenchie is leaving. Look out for yourself, because AZ does NOT care about you. Don’t be like the rest of the violin players clinging to the side of the Titanic as it’s going down. Get yourself a life vest and get out of there!

  10. Knowwhoworksthere says:

    I wonder if there is a correlation between success and hiring senior scientists from failed pump and dumps via temp agencies.
    Just saying.

  11. Anonnymoose says:

    The whole AZ swamp needs draining and asset-stripping. Toxic place.

  12. Mere chemist says:

    Having been in the audience in the APCC circa 2013, when the CEO presented the graph with the unmarked axes that clearly showed that whatever was on the y axis must surely get better by the time whatever was on the x axis arrived, my favoured hypothesis has always been that circa 2017 les poulets would come home to roost…

  13. AZbizness says:

    $80B cap, $20M turncoat
    Stiffed me $50 when I interviewed
    A-Z WTF?

  14. Sisyphus says:

    A friend interviewed at AZ and it took more than 6 months and a dozen emails to get reimbursed. The excuse was that someone in Sweden needed to approve the expense that was less than US$500.

  15. Annoned says:

    Why is Pascal Soriot the CEO of anything???
    I don’t understand how these people continue on in these positions.

  16. Tom Smith says:

    So key points missed here
    Teva is about to launch their first branded medication for Severe Asthma , a direct competitor for one of AZs own severe asthma products due to launch early next year.
    AZ are loosing senior management so something is not right. (Rats from a sinking ship)
    Symbicort a major cash cow for the company is losing hand over fist to generic competition.

  17. Calvin says:

    “Soriot “is currently planning to stay for the foreseeable future”, according to Bloomberg, citing people with knowledge of the matter.”

    Hmmm. Sounds like the ringing endorsement that football managers get when they are about to get fired. Tick tock

    1. Hap says:

      As long as the stock bounces back…otherwise, it was an expensive PR failure for AZ’s investors. Hope it’s not insult to injury.

  18. Ed says:

    I would like to make three points:
    – In these times of fake news it seems to me one needs to be even more careful in adopting rumors. Perhaps it would be wise to explicitly name sources (i.e. not just links) and their track record of reliability
    – It seems to me it is undoable for CEOs to comment on every rumor because any answer will lead to follow-up questions (for example, if he is not moving, did he meet with Teva folks?) that in turn may affect stock prices. A cynic may say that launching fake news could be used to cause market fluctuations and possibly lead to benefits for some
    – Change of senior management is just one of the less predictable variables in pharma, along with, for example, translation of preclinical promise into clinical benefit. If this uncertainty is too much for an investor, he/she should not be in it.

    1. Hap says:

      If management isn’t important to the future of a company, though, then why are they paid so much? If management identity is important for a company then turmoil with respect to its change is much ado about something. Given the money at stake, it would have been prudent to respond. PR people are cheap, relatively.

      We need to be careful about news that fits with our models – this seemed believable because it seemed that AZ management made promises almost no one seemed to believe to avoid the jaws of Pfizer, and given most trials, Mystic could pretty easily fail. The idea that someone would jump ship to avoid those consequences also seemed rather believable. Unfortunately, a single data point is still a single data point.

      1. Ed says:

        I don’t think I stated, and I did not mean to imply, that management is unimportant. I just think it is wise for them to not feed the cycle of speculation

        1. Hap says:

          If your management is important, though, there’s going to be speculation. Ignoring it when everyone else isn’t is unhelpful. While I’d be happier ignoring short-term investors in a long-term business, they’re still investors, and have to be taken into account. Helping them lose money for something you could have easily remedied is not going to be in your long-term interest.

  19. James Barlow says:

    Why this is even in Real clear Science is beyond me. Marketplayer gossip about the sad one dimensional lives of CEOs of the corrupt pharmaceutical industry are neither enlightening or amusing.

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