(Reuters) – After a three-year rebuild, Chief Executive Pascal Soriot reckons AstraZeneca’s (AZN.L) drug pipeline is now “full”, but he’s still hungry for acquisitions that pay for themselves straight away.
“Our focus is on delivering on the pipeline, but certainly we are looking and are open to acquisitions,” he told Reuters on Thursday, after reporting 2015 results.
Late last year, the British-based drugmaker made two acquisitions that will dilute in earnings in the short term, paying $2.7 billion for ZS Pharma and $4 billion for a majority stake in Acerta Pharma.
Future acquisitions, however, will have to boost profits from day one.
“We are not going to do any additional acquisitions that would increase the size of our pipeline. We would consider acquisitions that would be accretive, meaning they would generate additional earnings immediately,” Soriot said.
One recent deal fitting that bill was the purchase of Takeda Pharmaceutical’s (4502.T) established respiratory business for a modest $575 million.
But AstraZeneca could also consider larger purchases, Soriot said. He declined to say whether this would include acquisitions above $10 billion, adding he was “agnostic” in terms of size.
“In terms of the size, it would depend on any limitation related to our ability to finance it and how much additional profit we would generate,” he said. “Every case is different.”
He stressed that any further acquisitions would have to fit with AstraZeneca’s strategic therapeutic areas of oncology, immunology, diabetes, respiratory and cardiovascular disease.
The wider healthcare sector saw its biggest deal-making streak ever in 2015, with global transactions totaling $673 billion, according to Thomson Reuters data.
More recently, however, biotech stocks have fallen back, driven down in part by fears among investors of a political backlash against high drug prices, which may create opportunities for larger pharmaceutical firms.
“Prices have come down and, as a result, some companies are a bit more attractive than they used to be, but prices still remain quite high,” Soriot said. “It’s not that easy to find acquisitions that can be accretive immediately.”
AstraZeneca is going through a transition as older drugs lose patent protection, with analysts expecting a trough in profits this year and next before a hoped-for resurgence on the back of the new-drug pipeline.
Despite this, AstraZeneca plans to maintain research and development expenditure in 2016 at around last year’s level. The company spent $6 billion on R&D in 2015, equivalent to a hefty 24.3 percent of revenue.
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