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City comment: AstraZeneca enters a new era with drug companies on the up

·2-min read
AstraZeneca chief executive Pascal Soriot (PA Media)
AstraZeneca chief executive Pascal Soriot (PA Media)

It’s a new era for AstraZeneca, in more ways than one.

Firstly, Astra has now swallowed up US rare disease specialist Alexion. We got the first insight into how that $39 billion deal is being digested today. It’s early days yet but the bolt on has helped sales and core earnings soar.

Secondly, Astra is calling time on the not-for-profit treatment of its Covid-19 vaccine — a sign that it thinks the worst of the pandemic is behind it.

This is a significant change and one that needed to happen. Profits from the vaccine and other Covid treatments will be a significant earner for the pharmaceuticals sector in the coming years, sitting alongside established categories like cancer and diabetes treatments.

Rival Pfizer has seen its earnings soar thanks to profits it is already making on Covid jabs. It expects to sell $36 billion-worth this year alone and another $29 billion next year.

Sales of AstraZeneca’s vaccine are nowhere near those levels and unlikely to reach them given the lack of approval in the US and waning support for elsewhere. Even still, the Covid-19 vaccine remains Astra’s second biggest drug by sales and the company is ramping up investment in R&D on new treatments and jabs.

Learning to live with the Covid means there will be huge amounts of cash on offer for pharma businesses that can provide treatments. For Big Pharma, this could create a virtuous circle where big profits enable investment in finding new treatments that can keep the wheel turning.

Profiting from viruses — even preventing them — has always been tricky politically but there are rich rewards to be had for those that can get it right. Some market watchers think drug companies in the next decade could be to the stock market what tech businesses were in the last.

Pascal Soriot and his colleagues will certainly hope so.

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