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AstraZeneca Recruits New CEO

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AstraZeneca (AZN - Free Report) recently announced that Pascal Soriot has been recruited as the new Chief Executive Officer (CEO) of the company. He will take on his new position from September 1, 2012.

Until then, Simon Lowth will continue to act as the CEO. Mr. Lowth was appointed the interim CEO after David Brennan, the company’s erstwhile CEO, stepped down on June 1, 2012, after 36 years of service at AstraZeneca.

Mr. Soriot brings vast experience and knowledge of the pharma industry. He joined the industry in 1986 and has undertaken senior management roles across the globe. He will join AstraZeneca from Roche Holdings Ltd. (RHHBY - Free Report) , where he served as the pharmaceuticals division’s Chief Operating Officer. Before joining Roche, he headed Genentech as the CEO, which was acquired by Roche in 2009.

Mr. Soriot played an integral part in pulling off the $47 billion Genentech – Roche deal. He steered Roche’s pharmaceutical division during challenging times and has the experience of bringing a number of products into the market.

Our Take

We are positive on the upcoming change in AstraZeneca’s leadership. The new CEO will have his work cut out with the company facing several issues.

The generic competition that AstraZeneca is currently facing or expects to face for its various drugs has put significant pressure on the company. Some of the key products like Arimidex and Seroquel are already facing generic competition in the US, while Nexium and Crestor generics are expected to enter the US market in 2014 and 2016, respectively.

Additionally, there is increasing uncertainty regarding Crestor due to the entry of generic versions of Pfizer’s (PFE - Free Report) Lipitor in November 2011. The company’s much hyped drug, Brilinta’s performance has remained lukewarm. In 2011, AstraZeneca lost revenues worth approximately $2 billion due to generic competition and $1 billion due to government price interventions.

AstraZeneca has faced its share of pipeline setback as well with the development of several candidates (zibotentan, olaparib and TC-5214) being discontinued in 2011.

The company is looking to drive the bottom line through cost-cutting initiatives and share buybacks. The company is working on expanding its pipeline and portfolio through mergers and acquisitions.

The Ardea acquisition, the Amgen (AMGN - Free Report) collaboration and the expansion of the diabetes alliance with Bristol-Myers Squibb (BMY - Free Report) , all represent the company’s efforts in this direction. We expect more such deals in the near term. We believe that Mr. Soriot’s relevant experience in this regard will benefit the company.

We currently have a Neutral recommendation on AstraZeneca. The stock carries a Zacks #3 Rank (Hold rating) in the short run.

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