AstraZeneca plc (ADR) (NYSE:AZN)‘s in a tight spot. The big pharma’s sales and earnings have swung sharply lower recently, with patent expirations and generic competition slamming the company’s revenue. AstraZeneca plc (ADR) (NYSE:AZN)’s pipeline isn’t much to brag about, either. The future looks murky at best for this pharmaceutical icon, with CEO Pascal Soriot predicting revenue to fall in the mid- to upper-single digits for the year.
This company won’t go down without a fight, however, and acquisitions could be the spark that saves AstraZeneca from danger. Reports emerged this week that the company is among the interested suitors submitting first-round bids for small antibiotic developer Optimer Pharmaceuticals, Inc. (NASDAQ:OPTR). Is this the right move for AstraZeneca plc (ADR) (NYSE:AZN) — and could this be the start of a buying spree to save this firm’s future?
Bidding on the wrong buy
AstraZeneca plc (ADR) (NYSE:AZN) is just one of a few companies competing for Optimer, which has just one drug on the market, Clostridium difficile infection-treating antibiotic Dificid. Cubist Pharmaceuticals Inc (NASDAQ:CBST) is also vying for the acquisition, bolstered as Cubist Pharmaceuticals Inc (NASDAQ:CBST) already maintains a partnership with Optimer over the marketing of Dificid. Japanese pharmaceutical firm Astellas Pharma is also in the running for Optimer Pharmaceuticals, Inc. (NASDAQ:OPTR). GlaxoSmithKline plc (ADR) (NYSE:GSK), which is also in the acquisition hunt after seeing its operating profit fall 26% in the most recent quarter, has reportedly backed out of the competition after expressing interest early.
Optimer Pharmaceuticals, Inc. (NASDAQ:OPTR)’s hardly the big splash AstraZeneca plc (ADR) (NYSE:AZN) investors were hoping for. The company has a market cap of just less than $700 million and recorded less than $20 million in revenue in the most recent quarter. The company’s pipeline includes two other indications for Dificid in mid- to late-stage clinical trials, but Optimer won’t deliver the kind of revenue-bolstering punch AstraZeneca desperately needs.
Analysts expect around $150 million in sales for Dificid next year, and fellow Fool Sean Williams doesn’t see the drug likely eclipsing the $225 million annual sales mark. With that kind of poor prognosis for Dificid, AstraZeneca doesn’t need to spend hundreds of millions of dollars (or more) on a company with little upside, particularly as its finances continue to struggle from falling sales.
In need of a big buy
AstraZeneca’s losses are stacking up for the near future. Full-year revenue fell 17% last year, and Credit Suisse noted earlier this year that the company needs $6 billion in annual sales by 2016 to record 2% sales growth by that year. That’s hardly a plausible goal with the firm’s barren pipeline and won’t be supported by adding Dificid’s uninspiring sales projections.
To its credit, AstraZeneca plc (ADR) (NYSE:AZN) has been pushing to cement partnerships with other drugmakers recently. The firm paid $240 million to Moderna Therapeutics in March for a new developmental messenger RNA technology that could open up a number of drugs for AstraZeneca’s development. It’s also recently agreed to developmental drug partnerships with Boston’s Bind Therapeutics and Australian biotech firm Alchemia.