AatraZeneca has, in the past few days, seen its value rise above £200 billion after a spectacular surge in its shares. Few companies listed on the UK stock market have ever achieved this feat.
Under the leadership of Sir Pascal Soriot, the pharmaceuticals giant is one of Britain’s greatest success stories. But even his biggest admirer might not have predicted it when he took the helm a dozen years ago.
AZ is one of a tiny number of companies listed on the UK stock market that are truly world class in their field – a fact that appears to be lost on Rachel Reeves. The Chancellor is looking to scale back on a deal to give government support for a planned £450 million vaccine-making site on Merseyside, which may result in AZ taking the facility elsewhere.
Reeves may feel disinclined to offer state backing to a multi-billion pound company that is by all accounts thriving.
But, as her predecessor Jeremy Hunt put it: ‘If growth is the Chancellor’s aim then reneging on this deal is a funny way of showing it.’
Magic formula: AstraZeneca shares went from £29 when Soriot took over in 2012 to £130, giving a return of 589 per cent with dividends reinvested
AZ’s status as a great British business is a remarkable transformation since it came under siege a decade ago by Pfizer, the powerful US drugs group behind Viagra.
The American company mounted a £69 billion takeover bid and virtually no one expected Soriot to triumph over the predator.
That was to underestimate the wily and resilient French-Australian, who made his way to the top from a rough estate in the Parisian suburbs, where he was often forced into fights.
Having seen off Pfizer, he was faced with the daunting task of proving to investors he was right to have resisted.
Soriot has vindicated himself beyond everyone’s wildest dreams, except possibly his own.
Even without a hostile bidder, Soriot had taken charge at a difficult point in the company’s long history. Its heritage dates more than a century to 1913 when Astra, originally a Swedish business, was founded by a group of doctors and apothecaries.
Astra merged in 1999 with Zeneca, the pharma division of former British chemicals flagship ICI, which dismantled itself following a hostile bid from corporate raider Lord Hanson.
The pair listed on the London market with high hopes of creating another UK drugs powerhouse alongside rival GSK.
But by 2012, when Soriot showed up, the company was a laggard in its sector.
Some feared it could even follow ICI into the corporate graveyard.
Valuable drug patents were expiring, leaving it on a cliff-edge with precious little in the pipeline.
Soriot, who had left European rival Roche for a seeming basket case, was accused of committing career suicide.
Instead, his arrival heralded a spectacular rebirth.
In the thick of the Pfizer bid in May 2014, he set a highly ambitious aim of achieving revenues of more than $45 billion by 2023.
He achieved that goal ahead of time and has now set a new target of $80 billion of revenues by 2030.
Soriot’s secret is investing heavily in growth through innovation.
Whilst other big pharma companies ploughed money into sales and marketing, he insisted on investing a fifth of revenues into research and development, come rain, come shine. The result is that the company has 13 blockbusters – drugs with more than $1 billion of annual sales – on its slate, including cancer drugs Enhertu and Imfinzi.
It is expecting to launch 20 new drugs by the end of this decade, by which time it believes its tally of blockbusters will have reached more than 25.
Beyond 2030, AstraZeneca is pinning its hopes on ADCs, or Antibody-Drug Conjugates.
In simple terms, this is clever chemo that delivers a highly potent zap to cancer cells while minimising the damage to healthy ones.
Other areas earmarked for growth include weight management, where it is lagging the likes of Wegovy-maker Novo Nordisk.
The business is geographically diverse. China is the second biggest market after the US and more growth is expected from emerging economies.
Soriot’s finest hour so far, however, was the partnership with Oxford University to develop a Covid 19 jab, particularly as Astra is not particularly known for its expertise in vaccines.
Initially the injection was provided on a not-for-profit basis, which may not have maximised shareholder returns in the short term, but had incalculable publicity value.
Soriot’s handsome rewards have been the source of some controversy. Last year his pay-packet hit a high of nearly £17 million, taking his total earnings at AstraZeneca to a stupendous £135 million – and counting.
A third of investors at this year’s annual meeting revolted against a pay policy that could boost his haul to nearly £19 million this year.
These are staggering sums, but they are at least rewards for success. Reeves may feel she has no reason to subsidise a business where the boss earns so much money and the sales run into tens of billions.
But the reality is AstraZeneca can take its facilities, its jobs and its share-listing elsewhere, leaving Britain the poorer.
If she wants growth, she needs to back those who create it.
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