When defending their companies against hostile takeovers, chief executives usually resort to fairly prosaic and jargon-clad arguments. Your offer undervalues the business, stands on unrealistic synergies, lacks strategic vision, et cetera et cetera.
Thus Astrazeneca boss Pascal Soriot stood out from the crowd three years ago as he battled to fend off a near £70bn bid from US rival Pfizer.
In an extraordinary outburst for a senior business figure, Soriot, back in May 2014, asked: “What will we tell the person whose father died from lung cancer because one of our medicines was delayed, and essentially was delayed because in the meantime our two companies were involved in saving tax and saving costs?”
The claim – that a merger would derail life-saving drugs – looked even less wise on Thursday, after AZ admitted that its hotly-anticipated Mystic trial to develop an improved lung cancer treatment had failed.
Traders should have perhaps read between the lines of Soriot’s more recent words when, last month, the Frenchman said shares would “drop a little bit for sure” if its proposed new immunotherapy treatment fell flat. In the event, shares plummeted more than 15 per cent on Thursday, their sharpest drop in the company’s history.
At £43.25, the stock is now well below Pfizer’s £55 offer from three years ago (and remember, those 43 pounds are worth 20 per cent less than they were in May 2014 thanks to sterling’s decline). Moreover, Soriot’s pledge to deliver $45bn in annual revenues by 2023 looks increasingly silly. Sales of $10.45bn were recorded for the first six months of this year.
AZ’s chief exec possesses a wealth of experience and a vast understanding of the industry, and has undoubtedly energised the company since joining from Roche in 2012. However, he has made key mistakes such as overstating the chances of success and ensuing profits from the firm’s pipeline.
On Thursday Soriot again refused to rule out a move to Israeli generics behemoth Teva, only issuing vague non-denials (“I am not a quitter”). Rumours of his departure weighed on shares last month, and understandably so. But after this severe hit to the company’s value, the mood in the City is likely to have changed. If Soriot walks now, not every investor will be sad to see him go.