Friday, October 22, 2021

Vaccines were not part of AstraZeneca’s grand strategy, so what’s the plan now?

What’s AstraZeneca’s strategy in Covid treatments? In the short term, there is no confusion: the company will continue pumping out vaccine doses, will keep signing partnerships and will try to ignore churlishness in Brussels.

The long term, though, is another matter. Being big in vaccines was never part of chief executive Pascal Soriot’s grand plan for AstraZeneca, so there’s a decision to be made about what to do with an operation that has been built almost by accident during a global emergency.

The picture became slightly less clear on Tuesday as a Covid-19 antibody treatment, entirely separate from the vaccine, suffered a setback in clinical trials when it didn’t hit its main targets. Studies will continue, and there are some grounds to think the treatment could still be useful if given early to unvaccinated adults who have been exposed to the virus. But the nagging question remains: what’s the long-term vision?

Unlike Pfizer and Moderna, AstraZeneca isn’t making a profit from its vaccine currently (and may never) since it pledged to produce “at cost” during the pandemic. But it has acquired production expertise that could be valuable in developing other vaccines in non-pandemic fields. That’s the argument for doubling down, being opportunistic and expanding a vaccine portfolio that previously amounted to little more than a flu jab.

Yet committing serious sums would take the group down an unintended road. Soriot’s strategy in the last decade has been directed at specialist clinical products, especially in cancer. The latest $39bn (£28bn) acquisition of US biotech firm Alexion, a rare disease specialist, is even more niche. Vaccines are almost the opposite: even under normal commercial conditions, they are high-volume, low-margin businesses.

But, if the long-term route were to be an exit, how to get out? Selling to a longstanding vaccine producer, such as GlaxoSmithKline or Sanofi, would be one way, but possibly tricky if the main product can’t be sold at profitable prices. Or hand the operation to an international health organisation such as Gavi? Very noble, but the shareholders may expect to see a financial return.

The stick or twist question, as it were, would be more pressing if AstraZeneca’s core business had been distracted by the pandemic push. There is no evidence of that: recent trading figures were strong, so is the share price, and the Alexion purchase has been well received. One of these days, though, the board will have to share its thinking on the eventual Covid strategy. The issue is bubbling away and investors will want to hear a plan.


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