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What on earth is the boss of AstraZeneca up to with his approach to Gilead? | Nils Pratley | Business

What on earth is the boss of AstraZeneca up to with his approach to Gilead? | Nils Pratley | Business


It’s hard to keep AstraZeneca out of the headlines. A booming share price made the company the biggest in the FTSE 100 index last month, albeit Shell is now marginally in front again. More significantly, the group is in the vanguard of Covid-fighting efforts by helping Oxford University develop a vaccine and then, we hope, produce a successful product in massive volumes.

Now, though, comes something different: a Bloomberg report of an approach last month to Gilead of the US to create a new pharma giant. Nobody expects a deal to happen, it should be said. The proposal, if that’s what it was, seems to have been tentative and no talks are in progress now.

Yet AstraZeneca chief executive, Pascal Soriot, could do his shareholders a favour by clearing up a few things. Even vague tales of grand deal-making ambitions can set hares racing. Is AstraZeneca looking to capitalise on the strength of its share price? Does Soriot, having revitalised the company during almost eight years in charge, dream of signing off in dreaded “transformative” style?

Such thoughts will alarm AstraZeneca investors, who thought the future for the next few years was mapped out and rosy. The revenue promises made in 2014, when AstraZeneca heroically defeated a smash-and-grab takeover attempt by Pfizer, are being delivered in spades. Sales of new cancer drugs are soaring, with the smaller cardiovascular and respiratory divisions cued up to deliver the next round of growth.

Transatlantic pharma mega-mergers, by contrast, tend to be messy and political. An AZ-Gilead combo would be worth $230bn (£181bn) and would probably take half a decade to integrate. What would be the point? Gilead is big in HIV treatments, where AstraZeneca is absent, so it would be hard to mount a science-based case for a deal. Meanwhile, Gilead is barely growing its revenues.

Almost the only obvious fit is financial: Gilead has no debt, whereas AstraZeneca has lots. But that’s a flimsy argument. The relevant point is that AstraZeneca is not short of cash to spend on research and development. In short, Soriot’s self-improvement strategy is working just fine. Gilead-sized distractions are not required. Soriot should say as much.

BP dividend payout not looking so smart

“We are spending much, much more than we make – I am talking millions of dollars, every day,” said BP’s chief executive, Bernard Looney, explaining to staff why 10,000 of them, or one in seven, won’t be working for the company by the end of this year. So why did BP in April maintain its annual shareholder dividend, costing a colossal $8.4bn (£6.5bn) a year?

The answer, one assumes, is merely one of timing. Certainly, it is hard to see how Looney could cut so many jobs and warn the survivors not to expect any cash bonuses this year (that’s about half the workforce in a normal year) while preserving shareholders’ income.

The dividend arithmetic, arguably, has become more finely balanced after a doubling in the price of a barrel of Brent from the $20 seen in April. But the financial logic still heavily argues for a cut: BP’s balance sheet is stretched and the cost-saving plans haven’t been executed yet. Shell’s decision to cut the divi early still looks smarter.

Lookers’ reporting saga is now a mini-fiasco

“Together we will get through this,” says a pop-up message on the Lookers website, referring to Covid-19 and the closure of the car dealerships, rather than the publication of the 2019 results. But on the latter front, the question is: when will it get through it?

Back in early March, the discovery of “potentially fraudulent transactions” in one division meant the results were shifted until the end of April. That deadline came and went, but even last week Looker was confident of hitting the bare-minimum regulatory requirement of the end of June. Now it’s taking about the end of August – probably.

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When the numbers eventually appear, the only certainty is that Deloitte will resign as auditor, for reasons nobody was prepared to set out. Perhaps Deloitte is simply embarrassed. After all, Grant Thornton, the firm hauled in to examine the alleged fraud, unearthed additional “accounting irregularities”.

Lookers’ reporting saga is now a mini-fiasco. One assumes the chairman, Phil White, on the board since 2006, will join Deloitte in making a speedy exit.


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