On Thursday, the pharma giant’s half year results were eclipsed by a much more devastating piece of news – the failure of its lung cancer drug trial.
The trial is the first in a string of tests to be completed later this year and throughout 2018 as part of AstraZeneca’s Mystic project, which measures the efficacy of various drugs developed by the firm in attaining progression free-survival in patients with diseases like lung cancer, bladder cancer, leukaemia and breast cancer.
The Mystic setback had an immediate impact on the firm’s share price, sending it crashing down by 15% and erasing more than £10bn off its market value.
Importantly, it provoked further speculation of AstraZeneca being poised for a takeover.
Rumours about AstraZeneca as a potential M&A target have swirled for years now.
"Whereas the threat of a potential takeover lit a fire under Unilever to simplify its business model, AstraZeneca and its investors seem to have put all their eggs in one basket, namely the success of its Mystic project."
Famously, it came close to being acquired by American pharma kingpin Pfizer for £69.4bn in 2014.
At the time, non-executive chairman Leif Johansson said that AstraZeneca would “continue building on the momentum we have already demonstrated as an independent company”, promising a pipeline of new innovative drugs and further growth.
At around £43 per share, its shares were around £12 lower than Pfizer’s offer of £55 per share.
Three years later, has AstraZeneca delivered on its promise to shareholders?
Whereas the threat of a potential takeover lit a fire under Unilever to simplify its business model, AstraZeneca and its investors seem to have put all their eggs in one basket, namely the success of its Mystic project.
Some investors have been waiting for the other shoe to drop for some time now.
Liontrust’s equity income team predicted earlier this year that there could be disappointment with AstraZeneca’s innovations in the immuno-oncology space and cut its exposure accordingly, from 5% 12-months ago to its current 0.8%.
Back in February, co-manager of the Liontrust Macro Equity Income fund Jamie Clark argued that too much was riding on the outcome of the Mystic trials, drawing parallels with Bristol Meyer’s own fall from grace.
Bristol Meyers, once believed to have an unassailable lead in the I/O space, was “priced at a steep premium to peers with little room given to the possible limits of I/O and the risk of future disappointments”. The same can be said of AstraZeneca, he argued.
Clark’s co-manager Stephen Bailey reiterated the same point Thursday morning, arguing now more than ever Britain’s second largest pharma company looks poised for a takeover.
“The impact of Mystic on AstraZeneca’s share price was always going to be explicitly binary,” said Bailey.