I do not believe that Pfizer will renew its offer for AstraZeneca when the American pharmaceuticals company is able to next week.
There are three reasons for this. One, the climate towards such tax-driven deals has changed in the United States, to the extent that another in the pharma area, AbbVie’s approach for Shire, fell apart last month for just this reason.
Second, Pfizer’s deal with Merck this week involves developing an anti-cancer drug that works by boosting the body’s immune system. There is a non-competition deal that would seem to rule out any collaboration with Astra’s own new compound in this area. This, in one of the few pieces of new news in Astra’s mammoth presentation to analysts and investors, will lead to its development being brought forward, with a submission to the American authorities in the second quarter of next year.
The third reason is the advances Astra has made since the original bid lapsed six months ago. Pascal Soriot, the chief executive, said that its oncology treatments would form a sixth platform for growth for the group, with six new treatments hoped to be on offer to patients by 2020.
He reiterated the intention to increase revenues to more than $45 billion by 2023, against a figure of $25.7 billion last year, itself down by 6 per cent because of the incursion of generic drugs into sales of Astra’s treatment that had gone off patent. This promise was made at the time of the bid and some wondered if it was achievable. As Mr Soriot admits, developing new compounds is an uncertain business, but he believes that those oncology drugs have advanced further over the summer than the company had expected.
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Astra has focused on five growth platforms — diabetes, respiratory treatments, emerging markets, Japan and Brilinta, its heart disease drug that is making slow headway in the United States. The group will continue to suffer as some of its blockbusters fall out of patent, such as Crestor, although a rival to Nexium has been slow into the market.
This does suggest some upside for the shares, up 88½p to £46.85. For now, a forward dividend yield of almost 4 per cent is good enough reason to buy the shares.
Forecast revenue by 2023 $45bn plus
$2.81 Dividend consensus for 2014
My advice Buy
Why The shares look a good two-way bet. The income is attractive and Astra is back in growth mode. A further Pfizer bid would be a bonus on top
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Several observers in the market fail to appreciate, or possibly even to understand, the transformation going on at Intermediate Capital Group.
This made its name as an investor on its own behalf in abstruse but high-yielding mezzanine debt. Gradually it is shifting into more traditional fund management, taking third-party money while continuing to invest in those profitable forms of debt.
It is a complex business and ICG’s figures are not always the easiest to interpret. Halfway pre-tax profits almost halved, from £155 million to £85 million, entirely down to a fall in profits realised from selling assets on the investment side of almost £80 million, after the sale in the previous period of its biggest asset, a holding in Allflex, which makes animal tags.
As the fund management side is built up, and assets under management were 6 per cent up over the period at €13.7 billion, fee income will rise and this more than tripled to £15.1 million, from £4.8 million.
Although ICG will continue to invest its own funds, this is a more capital-light business, as well as a less volatile one, which means that there is excess cash on the balance sheet. The company is returning £100 million through a share buyback; a further £400 million or more should become available over two years, for buybacks or cash returns.
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The shares, up 26p at 443½p, yield a little over 5 per cent already. This is a tricky one to value, but I would be a buyer, waiting for the market to appreciate those capital returns fully.
Total AUM €13.7bn, up 6%
My advice Buy long term
Why Company strategy may take time to be appreciated
I have suggested several times before that Informa, the exhibitions and data group where Lord Carter of Barnes has been chief executive all year, is a work in progress. The former Stephen Carter plainly agrees.
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The company made its biggest acquisition on his watch yesterday, a £237 million deal to buy Hanley Wood Exhibitions in the United States. This looks like a good fit, with its existing construction and property interests there, and the multiple paid, 11 times earnings, is in line with others in the sector.
The purchase price is being met out of existing resources, yet Informa is also raising a further £207 million via a placing equivalent to 7 per cent of the existing share capital.
Clearly, further purchases are expected in exhibitions, which remains a highly fragmented market. Meanwhile, action is being taken over the under-performing business information offshoot, with some consumer-facing and forecasting assets earmarked for action.
The shares, off 35p at 469½p, change hands on almost 12 times earnings, yielding 4 per cent. That gives some support, but there seems no reason to chase at this level.
Amount paid for Hanley Wood £237m
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My advice No reason to buy
Why There is more work to be done on reshaping
And finally...
Sepura is an oft-overlooked British tech business, based in Cambridge, which supplies robust radios to the emergency services. The company, which has its roots in the old Pye radio maker, released a confident first-half statement, with record revenues, though there is a strong second half bias. Sepura is shipping more to North America, a market that had been difficult to enter. Some analysts are interested in the potential inherent in the switch from analogue to digital radios, a process only a third complete.
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