On January 14, 2021, Alexion Pharmaceuticals, Inc. (“Alexion”) posted the following clip on its internal intranet website accessible to Alexion
employees [https://youtu.be/QOBSnzidOVY], a transcript of which is set forth below:
This is AstraZeneca’s research facility in Sweden. Walls here are being torn down to promote conversation between scientists that could lead to medical
breakthroughs. It’s also a message at the heart of a stunning new headquarters taking shape in Cambridge. This is Bloomberg Turnaround. Join me to see how Pascal Soriot is building transparency and collaboration and putting the pep back into
When AstraZeneca was searching for a new chief executive in 2011, it was poised to lose $17 billion in sales due to expiring patents. Pascal Soriot was
appointed in 2012. His task, replenish the drugs pipeline. Since his appointment, the share price has doubled.
The problem was that we had spent a lot of time doing rounds and rounds of cost-cutting, reorganization, and doing share buybacks as opposed to doing what
it was we should be doing as an industry, which was really focusing on science and developing medicines.
On day one, Soriot suspended the buybacks.
Soriot comes more from an operational and R&D background. And I think that the new people that were put in charge were also the types of people who were
more focused on innovation than just sales as driving the top line.
So more about the science?
Absolutely. Which is what pharmaceutical is about.
Soriot increased spending on research and development, focused on cancer, the fastest growing space in pharmaceuticals, and emboldened scientists to abandon
You really have to make sure you choose projects that will succeed, but it’s almost as important to choose the projects that you should not move into phase
three. Because otherwise you spend a lot of money going nowhere.
AstraZeneca was in a situation where they had been losing revenue for years and years. And really threw a focus back on science, back on R&D. They were
able to launch a number of products. And the oncology business unit really started growing. And for the first time, in 2018, we saw AstraZeneca having the energy, having the spirit, and showing the growth numbers again, and really delivering on the
If there was a single thing Soriot did to demonstrate his tenure would be a new dawn, it was his championing of Lynparza, an ovarian cancer treatment the
previous management had scrapped. It’s now on its way to becoming a blockbuster, the moniker given to a billion dollar seller. Lynparza sparked Soriot’s curiosity even before he joined the company.
I talked to [inaudible 00:03:00] leaders and I was really intrigued because I thought this drug looks interesting, but they’re not doing much with it. And
in fact, they had announced a write-off. They had decided to stop the program, and they had written off the intangible, the goodwill, that was associated with this product project. And I still remember I went to an opinion leader, an expert in the
field. And I remember having this breakfast meeting with him in the US and he looked at me at some stage and he said, “Look, what you’re doing is almost criminal because this drug should already be treating patients.” So I arrived with a clear view
that it was one of the medicines I needed to look at. And what I found is a research team that was really convinced this was a great drug and had been trying to convince the organization as a whole, but had not been successful.
In 2017, US drug maker Merck agreed to pay as much as $8.5 billion to share in the development of Lynparza, which can also be used for pancreatic and other
cancers. The drug’s expected to generate $2.5 billion in revenue this year and next. And along with other key treatments like Tagrisso and Imfinzi, fuel the gains expected by analysts through 2020.
He has a nose for a drug. When we showed him the data for Lynparza, when we showed him the data for Tagrisso, he realized that these things could be
medicines and he helped us pull those things through the pipeline into late stage development and ultimately to launch and to patients. That takes courage, but it also helps us accelerate and push things faster. That was tremendous. And it’s the
things that were originally blocked were now unblocked and were moving really fast through the pipeline.
AstraZeneca was formed in 1999 by the merger of Sweden’s Astra and Zeneca of the UK. It’s based in the British university town of Cambridge, where it’s
surrounded by some of the most renowned biopharmaceutical researchers in the world.
In our industry, it’s fundamental. There’s nobody who wakes up one morning saying, “Okay, I’ve got the solution to develop discovering of new products.” The
work we do or requires people to work together.
You need the scientists to understand what the future profile is going to look like, what the potential competitive angle is, and what the potential way of
marketing it would be. And well, the physicians would say, “That’s a very long list of things to have to deal with when you’re dealing with a program that needs to take 10 years to come to market.” Having everyone together and making sure that
they’re able to talk to each other is a key driver.
Mene Pangalos showed me around the new campus and explained how the building is all about collaboration.
We’re really placing ourselves in the middle, in the heart of one of the best life sciences clusters in the UK. And actually, probably in the world. The
idea behind this building is it’s meant to be transparent, porous, collaborative, inviting to our partners, to people who are interested in the science that we’re doing, so that we really make our science and our scientists accessible. And that’s
all a part of our cultural transformation.
Inside this construction, there are these huge laboratories embedded into the building. There’s going to be 19,000 square meters of them. That’s three
football pitches. All the way along here, there’s going to be the desks where the scientists will write up their experiment. And then of course, all the support staff. I’m told they can’t wait to move in.
There’s a lot more ahead on how AstraZeneca’s new buildings are breaking down barriers. But first, fighting off Pfizer.
At the end of the first day, the bankers must have felt a bit sorry for me. They came and they told me, “We have to tell you, you have less than 10% chance
of remaining independent.”
As the work on boosting AstraZeneca’s drugs pipeline started to take off, a fresh threat appeared. Pfizer.
It’d be one of the biggest deals in all of pharma history.
We know that Pfizer had made an approach in January.
You’ve got a keen buyer, a very keen buyer, but perhaps not such a keen seller in this trade.
In 2014, Astra’s US rival made four attempts to buy it in less than six months. The final offer was for $117 billion. It would have been the biggest
pharmaceuticals takeover ever.
It was really an interesting day because I arrived in London and I opened my phone and my daughter had sent me a message telling me my wife was at the
hospital with a pulmonary embolism. So I called her and she was fine, but it was a bit of a stressful day. And then we arrived at the office and we started working the whole day with the lawyers, as you can imagine, bankers, lawyers, and our own
people. And at the end of the first day, the bankers must have felt a bit sorry for me. They came in and told me, “We have to tell you, you have less than 10% chance of remaining independent.” So that was at the end of that day, I thought, “Wow,
that was an interesting day.”
Well, you didn’t believe them, clearly.
No, actually, sometimes when people tell me a project has a real probability of success and I believe in it, I tell them, “20% is not bad actually because I
only had 10% of a chance of remaining independent.”
As Pfizer continued to chase to create the world’s largest drug maker by sales, lawmakers in Britain, Sweden, and the US grew increasingly critical.
The most important intervention we can make is to back British jobs, British science, British R&D, British medicines, and British technology. And that
is why I asked the cabinet secretary and my ministers to engage with both companies right from the start of this process.
AstraZeneca rejected the deal, disappointing many investors.
This price doesn’t reflect the new AstraZeneca. In the last 18 months, we’ve made enormous progress. We’re building our pipeline. And we believe this
pipeline is going to deliver value for patients, of course, but also for our shareholders.
You had the board on side, but investors, many investors, say, “No, it was the wrong thing to do.” But I also understand that you managed to use this
situation as a way of galvanizing the staff. What happened there?
Yeah, I think it was of course a stressful time, yes, for everybody in the company. But it was also a great time in retrospect because it was a time when we
had this burning platform of showing that we could actually deliver value, not only to patients, but also to our shareholders. We’re just focusing on what we were doing. And it really galvanized everybody to actually do their best.
And that meant showcasing that AstraZeneca’s future was bright. Soriot projected a 75% increase in annual revenue by 2023 and announced the company had 15
drugs nearly ready to go, almost double from the year before. He promised investors their shares would rise beyond the 55 pound offer price. It took four years to get there.
Our job is to turn science into medicine and ultimately get those medicines to patients. You looked at our success rates from 2005 to 2010, our success rate
from drugs entering clinical development first in human experiments to launch were around 4%. Today, in the most recent assessment we’ve done, which was looking at 2012 to 2016, our success rate has now gone up to 20%. We were very good at focusing
on large numbers of projects, but that actually had a relatively low probability of being medicines. Today, we’re very much focused on the quality. We actually cut almost half the projects in the pipeline. And even with that cut, we still improved
our success rate significantly. So that was quality not quantity is hugely, hugely important.
It’s important to remain nimble and fast paced, but in order to do that and make decisions, you yourself as a leader have to have a fair quantity of self
belief. Where does that come from?
Well, it’s actually [inaudible 00:11:33] belief in the people you have around you. Belief in the advice you get, belief in the culture you’ve created. And
it’s really about digging into data, understanding what physicians think, experts think, and aggregating all of this and analyzing it. And at the end of the day, it’s about the belief of that you have to take risks. And then at some point, you have
to accept you may fail.
What is it that you bring to the organization that allows that communication to come out and for these drugs to be recognized when it wasn’t before?
One of the most important time points is when you are in the phase one, phase two, and you have to decide whether a drug should be developed in phase three.
And here, you really have to look at it from all angles and really understand where it could help patients and how it could be used in clinical practice. And the way you do this is really by bringing people together and really brainstorming and
debating and discussing the data and the various opinions.
But also beyond that, I think you need to create the right kind of culture. One of the issues we had was we had experienced a few setbacks in development.
We had three products that failed in late stage development in 2007, 2008, or something like that. And that happens. All the companies have experienced that. But at the time, the management of the company decided, “Okay, well, we’re not going to
fail again.” And so when you tell people, “We’re not going to fail,” you never fail in phase three because you never move anything in phase three. You got to really create an environment where people feel comfortable taking some educated risks. So
it really is about sharing knowledge, sharing data, debating, and being willing to take educated risks.
We have entered into an agreement of a global joint development and commercialization with AstraZeneca.
Soriot’s most significant educated risk so far was a $6.9 billion deal in March with Japan’s Daiichi-Sankyo to develop a breast cancer treatment that could
even replace chemotherapy, potentially reshaping the future of cancer care.
The potential is very large, and we see it as a mega blockbuster.
AstraZeneca was obliged to partly fund it with a $3.5 billion share sale, highlighting the company’s scarce cash resources.
They needed to raise money from the market. And they raise a little bit more because they have some debt repayments coming up. That, I think, highlighted
the cashflow needs. Of course they could have gone and probably given up some of their rating and raised debt again. But that would have been expensive. People would say equity’s expensive, but at the end of the day, this was a much faster way of
getting what they needed and they did it. But that’s if there’s a focus on cashflow.
The Daiichi deal, why is that a key deal for AstraZeneca?
I think people today don’t really understand fully the potential of this medicine. It can transform a breast cancer treatment. And I personally believe it
can be a very big product. And I don’t think people have totally realized how big it can be.
Coming up, we go to Sweden, where AstraZeneca has thrown away the keys and invited outside businesses to install themselves right next to its scientists.
The emphasis on bringing people together is a key plank of Soriot’s turnaround. The investment into buildings like this in Cambridge and these in Sweden is
all about getting people to come together and share ideas.
The company was operating in silos and actually not necessarily believing in each other. So you had a commercial function, and then you had the R&D
function, and there was not a lot of belief, say in commercial, that R&D was delivering. And in R&D, we had also fragmented teams. We had the MedImmune team, we had many different teams not working really together.
At the Gothenburg site, there is a huge model that shows how existing and new buildings are going to work together.
Most of the world’s brilliant minds do not work for AstraZeneca. We have 64,000 fantastic employees, but most great ideas are conceived somewhere else. And
if we are going to take part of that, we have to work completely different with the external world.
Joachim Reischl is one of those charged with making the changes. All right, this is clearly one of the modern new facilities for research and development.
Why does this work more productively for AstraZeneca?
As you can see, it’s a much more open environment. We have torn down the walls and we have scientists from different disciplines working in this
environment, which makes it easier for collaboration.
Why does it make it easier? Are they working on the same disciplines or are they-
They’re working on different diseases. We have scientists that they’re researching heart disease, kidney disease, and respiratory disease. And the
interesting thing is that those diseases have some commonalities, which now we can actually understand better by having those scientists working together in the same space.
And so before, all of these people would have been working separately on their own disciplines.
They would have been working in separate labs, absolutely.
Another innovation is the BioVentureHub, where companies are invited to establish themselves inside the campus and given the same access as the rest of the
What it means in practice, as I say, is that talented people with new technologies and new ideas will get inside AstraZeneca, build their companies, develop
their science, and they will do that together with AstraZeneca, formally, informally.
This as a completely different company. So as an example, we today have our BioVentureHub here at the company. It’s 34 external companies, same pass card as
I have, access to our full site. We share knowledge. About 18 years ago when I joined AstraZeneca, we almost pulled down the curtains before open a drawer. That’s a major, major change that we’ve on done.
Katarina Ageborg, the chief executive of AstraZeneca Sweden, says the Coffee Lab at the Gothenburg campus is but one example of how the dynamic is changing
inside the company.
I think the biggest thing is the cultural change in how we operate in terms of opening up, working a lot more with the smaller companies, academia, and just
around the world, collaborating more externally, not assuming we have the best people everyday inside, but rather opening up. That’s one big thing. I also think actually the cultural thing. Sometimes we forget that he has been driving a very, very
values driven way of working. I think if you walk around here or anywhere in AstraZeneca, everyone would know our five values. And it actually really means something to people. So we put patients first, we follow the science, we’re entrepreneurial,
we play to win, and we do the right thing.
Soriot continues to make changes to gain an edge. In January, he reorganized R&D into two divisions, one to focus on cancer, the fastest growing and
most lucrative part of the industry, and the other to oversee the rest.
It was necessary because the structure we had in place served us very well for about five years or so. Five years ago, we didn’t have much in our pipeline.
We had to create these early units that were kind of our biotech units coming up with new products. But as we were becoming more successful with a full pipeline, the structure was playing against us a little bit. We were becoming a bit too
bureaucratic and too focused on governance. And our oncology pipeline in particular has grown tremendously. And oncology is a little bit different from the rest of pharmaceuticals. So I decided that the reorganization was necessary so we could move
very quickly from research to early development to late development in oncology, bring people together from research development to commercial in oncology, but also in biopharmaceuticals.
And when it comes to building new markets, AstraZeneca, like many, is looking to China and its increasingly affluent patients. When did you first begin to
see China as a key market?
Almost immediately because as I started, they really hard to look for areas where we could grow. I had to look for the strengths of the company. And number
one, where we could rebuild the pipeline, how we could rebuild the pipeline, but also looking at this massive patent expiry that we were facing. Where could I find growth? And China was one of those. And in fact, the pipeline of the portfolio of
products we had and still have really addresses the needs of patients in China. So immediately I thought we have to invest in China and keep growing.
Since becoming AstraZeneca’s CEO, Soriot has refocused the company on science, he’s reconfigured buildings to open them to outside minds and ideas, and he’s
replenished the company’s pipeline.
2012, AstraZeneca was a completely different company. We had great sales, great profit, and virtually no pipeline whatsoever. This is the time that Pascal
Soriot came into the company and that the company changed leadership. So if we fast forward from that time about five or six years, from almost no pipeline whatsoever, some analysts claimed that we had the best pipeline in the industry.
The questions remain about the dearth of cashflow highlighted by the Daiichi deal.
The issue for Astra is that there’s only so much cash. And as we know, that is one of the key questions around the company.
Let’s go more into that though. So why is that a question?
Well, pharmaceutical companies are historically great cash generators. There’s two reasons people have historically invested in pharmaceutical companies.
One is the fact that they’re driven by demographics and they are a defensive sector normally. And the other one is that they throw off tons of cash. So where the cash flow becomes a bit thinner, that becomes a question. And of course there’s not
much you can do when three, say, roughly $5 billion products at the same time are going off patent, and products at the end of their lives are very profitable because they don’t need much detailing. How do you replace that? That’s a pretty
difficult thing to do.
That said, Fazeli says AstraZeneca’s latest results did indicate that cashflow is going to improve on the back of growth and high margin products. As far as
Soriot is concerned, it’s not his biggest worry. Witness a decision announced in June to invest $630 million over the next five years in the South Korean healthcare sector. Or a $220 million commitment to Vietnam’s health sector unveiled in May.
The bigger risk for us is to become complacent. Actually, it’s interesting. We didn’t have anything. We then were potentially acquired, and there was an
enormous burning platform for all of us to do our best and work hard and move fast. And as you become successful, you can become slower and more complacent. So that’s the one thing, really, I don’t want to see happen.
Additional Information and Where to Find It
In connection with the proposed transaction, AstraZeneca PLC (“AstraZeneca”) intends to file with the SEC a registration statement on Form F-4 that
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the expected revenue for Alexion for the fiscal year ended December 31, 2020, anticipated benefits of the proposed transaction, the impact of the proposed transaction on Alexion’s and AstraZeneca’s businesses and future financial and operating
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Additional information concerning these risks, uncertainties and assumptions can be found in Alexion’s and AstraZeneca’s respective filings with the SEC, including the risk factors discussed in Alexion’s most recent Annual Report on Form 10-K, as
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acquisition is delayed, is not obtained or is obtained subject to conditions that are not anticipated; AstraZeneca is unable to achieve the synergies and value creation contemplated by the proposed acquisition; AstraZeneca is unable to promptly and
effectively integrate Alexion’ s businesses; management’s time and attention is diverted on transaction related issues; disruption from the transaction makes it more difficult to maintain business, contractual and operational relationships; the
credit ratings of the combined company declines following the proposed acquisition; legal proceedings are instituted against Alexion, AstraZeneca or the combined company; Alexion, AstraZeneca or the combined company is unable to retain key
personnel; and the announcement or the consummation of the proposed acquisition has a negative effect on the market price of the capital stock of Alexion or AstraZeneca or on Alexion’s or AstraZeneca’s operating results. No assurances can be given
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