AstraZeneca's (AZN) Best Chance to Regain Profitability? One Major Acquisition...

February 12, 2013 12:38 PM EST
AstraZeneca (NYSE: AZN) is trading about five percent lower following fourth-quarter results issued at the end of January. The pharma reported a 37 percent drop in profit, while also putting up expectations that profitability will drop "significantly" more than revenue in 2013, largely as profitable drugs are losing patent protection and the company's pipeline hasn't been able to keep up.

Despite the dip, all is not lost for AstraZeneca. A large acquisition might do wonders to revamp profitability, while diversifying its product portfolio just a little bit more. One candidate might be Shire plc (Nasdaq: SHPG), which is a leader in attention-deficit disorder therapies as well as having a large stable of patent-protected medicines.

Another could be Forest Labs (NYSE: FRX) for its lung treatment unit. Privately-held Bausch & Lomb would give AstraZeneca a jump into the multi-billion eyecare industry. Swiss drugmaker Actelion Ltd. might also be in the mix. With a market cap of $10 billion, Actelion is working on a drug to treat pulmonary arterial hypertension which is awaiting market approval.

About 40 percent of AstraZeneca's top-line will be at risk, with names like Seroquel for schizophrenia, Nexium for ulcers, and Crestor having lost or are about to lose exclusivity over the next few years. Since last June, AstraZeneca has closed nine drug development programs.

Chief Executive Officer Pascal Soriot has been adamant about keeping AstraZeneca's credit rating, currently at AA- by Standard & Poor's. The firm has about $7.7 billion in cash and $10.3 billion in debt, meaning it could spend about $10 billion on a deal without triggering a downgrade.

AstraZeneca is down about 0.2 percent on the session Tuesday.

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