Fishy deal not enough to prove that Soriot can pick a winner

Elizabeth Fournier
AS specialist annuity provider Partnership Assurance proved yesterday when it revealed an impressive price range for its London stock market debut, matters of life and death are big business.

For pharmaceutical companies, that means that finding the right drug – whether it’s the latest stop smoking aid or a heart-attack busting statin – can be game changing. AstraZeneca boss Pascal Soriot has been searching for his next big hitter since joining the firm six months ago, acutely aware that the patent on No.1 seller Crestor – which lowers cholesterol – expires in 2016. At first glance Omthera, which makes fish-oil derived drugs to treat high levels of blood fat, looks like a sensible choice. Soriot has been rightly focusing on supplementing his cardiovascular pipeline and the deal is hedged by an increasingly popular “contingent value rights” clause – where AstraZeneca will only pay out a further $120m if Omthera’s trials are a success. But blockbusters don’t come cheap. Soriot paid $323m for Omthera yesterday – a huge 88 per cent premium to its share price – just a month after an IPO that priced well below its planned range and valued the firm at just $165m. And though its main drug Epanova is over the main hurdles, it still needs to win final US regulatory approval.

If Soriot wanted a bargain he should have swooped while Omthera was still private. A risky play like this is enough to send investors’ blood pressures soaring.