AstraZeneca science is on the move, one year on from Pfizer bid

* New (KOSDAQ: 160550.KQ - news) drugs make progress, high hopes in lung cancer treatment

* Pipeline supports shares despite tough 2015 outlook

* Generics and FX challenge goal of hitting EPS target

By Ben Hirschler

LONDON, April 15 (Reuters) - Having seen off a hostile $118 billion bid launched a year ago by U.S. rival Pfizer (NYSE: PFE - news) , Anglo-Swedish company AstraZeneca (NYSE: AZN - news) is on the move -- quite literally.

As of last month, a four-days-a-week service set up by the drugmaker with Sun Air is connecting staff in its new Cambridge science and operations hub with those in Gothenburg, the group's other major European centre.

Chief Executive Pascal Soriot is making AstraZeneca more nimble as hopes build for its cancer pipeline, but he still has his work cut out to keep 2015 earnings above the floor needed to protect his bonus.

Investors must balance the short-term challenges posed by a massive "cliff" of patent expiries for older drugs against AstraZeneca's long-term promise that sales can reach $45 billion in 2023 from $26 billion last year.

So far, Frenchman Soriot has played his hand well, given the inevitable disappointment among some shareholders at the rejection of Pfizer's final 55 pound-a-share offer last year. Even (Taiwan OTC: 6436.TWO - news) though many analysts view the $45 billion sales target as a stretch, the stock is now back above 48 pounds.

Stephen Lamacraft, fund manager at Woodford Investment Management, thinks the price rise is fully justified given the pipeline progress in the last 12 months, especially in cancer.

"The merits of its immuno-oncology assets are well known but still undervalued, while there are still some relatively unknown drugs such as roxadustat - an oral product to treat anaemia - that could provide material upside," he said.

Woodford, a staunch opponent of Pfizer's bid, has made a big bet on Soriot delivering, since AstraZeneca makes up an outsized 7.5 percent of its Equity Income fund.

AstraZeneca faces tough competition in the market for hot new cancer treatments that boost the immune system, and it is behind Bristol-Myers Squibb and Merck (Swiss: MER.SW - news) & Co, which already have drugs on the market.

Yet Jefferies analysts argue it is effectively ahead of rivals when it comes to the big commercial opportunity of combining immuno-oncology drugs in lung cancer.

Its cancer progress was underscored this week, with news that it will present a bumper 62 pieces of scientific research at the April 18-22 American Association for Cancer Research annual meeting, while its tremelimumab drug won "orphan" drug status in the United States. The designation aims to encourage drug development for rare conditions.

Outside cancer, heart drug Brilinta has shown potential for wider use and its diabetes medicine Onglyza dodged a bullet on Tuesday when a U.S. advisory panel advised against recommending prescribing restrictions.

INDEPENDENT STRATEGY

"The quality of the transformation we are seeing across our organisation further underpins our confidence in AstraZeneca's longer-term prospects," a company spokeswoman said.

"We are on track to return to growth by 2017 and are well positioned to deliver our long-term goals through our independent strategy."

Quarterly results on April 24 are unlikely to be pretty, however. Sales of stomach acid pill Nexium are now eroding fast, following the arrival of U.S. generics in February, and its top-selling cholesterol drug Crestor is also in decline.

With AstraZeneca also facing headwinds from the strong dollar, consensus forecasts now point to 2015 earnings per share of $4.21, just one cent above the level needed to hit bonus targets.

Soriot and his team are required to ensure the dividend cover ratio does not fall below 1.5 times "core" earnings, which excludes certain items, implying an EPS target of $4.20.

Achieving the 2015 earnings goal will require tight control on costs and more cash-generating "externalisation" deals, like the ones Soriot has already struck with Eli Lilly in Alzheimer's and with Daiichi Sankyo for a new constipation drug.

Given the uncertainties about a sales target stretching out to 2023, some investors have argued management incentives should be nailed to firm milestones in achieving this goal.

But Charles Luke, senior investment manager at Aberdeen Asset Management, a top ten investor in AstraZeneca, is relaxed about the current set-up of tying incentives to pipeline sales growth, total shareholder return and maintaining the dividend.

"If they get all those right, it leads to a situation where the company will be doing pretty well in five or 10 years time, and having a tight focus on one particular number is not necessarily helpful," he said. (Additional reporting by Simon Jessop; Editing by Keith Weir)