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Victor von Reiche
Portfolio Manager


The global COVID-19 pandemic has put medical science firmly in the spotlight, underlining the role it plays in dealing with well-known medical afflictions, such as heart disease, cancer, diabetes and other chronic disease, but also as a vital tool in the fight against infectious disease.

To this end the level of innovation we’ve witnessed has been astounding (see Figure 1). A number of companies have developed successful COVID-19 vaccines notably: Moderna, Pfizer/BioNTech and AstraZeneca.

Of the three, Moderna and Pfizer/BioNTech are employing a novel treatment – an mRNA vaccine – which has achieved high efficacy. AstraZeneca, meanwhile, has followed a more traditional route with regards to its vaccine development in collaboration with the University of Oxford and has achieved reasonable success so far, based on clinical trial data.

On 11 December 2020 the United States (US) Food and Drug Administration granted Pfizer/BioNTech emergency-use authorisation to distribute its COVID-19 vaccine in the US. Earlier in the month Canada’s health regulator also approved the vaccine, following the first global authorisation by the United Kingdom’s Medicines and Healthcare Products Regulatory Authority on 2 December.

AstraZeneca will also have a critical role to play, given the good safety record of its vaccine, as well as ease-of-storage advantages – the vaccine can be stored in a domestic fridge as opposed to the Pfizer/BioNTech vaccine, which requires ultra-low temperature storage of around -75 degrees Celsius. Scale is another plus, with the company estimating capacity of three billion doses in 2021, as is the focus being given to emerging markets.


Sources: The College of Physicians of Philadelphia; WHO; CDC; National Institute of Health; Business Insider


Source: Company disclosures; Barclays research and estimates

Figure 1: Vaccine development history and timeline


AstraZeneca can trace its roots back to forerunner Imperial Chemical Industries (ICI), which was created from the 1926 merger of four British chemical companies. The merger was a reaction to IG Farben, a German amalgamation which, at that time, was the biggest company in Europe and the largest chemical and pharmaceutical company in the world. IG Farben was eventually seized by the Allies after the Second World War and divided back into its constituent companies.

ICI focused on research, recruiting chemists, engineers and managers, and forming alliances with universities. Between 1933 and 1935 a number of new products were created, including polyethylene. The company’s fortunes, however, declined as competition increased in the aftermath of the war. In 1982 chairman John Harvey-Jones shifted ICI from bulk chemicals to high-margin specialty chemicals such as pharmaceuticals and pesticides. That business became Zeneca, which ICI spun off in 1993. The takeover spectre loomed large over the company during its first year. Zeneca had several drugs in the pipeline, but it also had expiring patents on others, making them fair game for competitors. Bankrolled by its agrochemical business, Zeneca forged alliances with other pharmaceutical firms.

In 1999 Zeneca completed its purchase of Sweden’s Astra to form AstraZeneca. That year the firm sold its specialty chemicals unit, Zeneca Specialties, to Cinven Group and Investcorp. With its agricultural business stagnating due to crippled markets in Asia and Europe, AstraZeneca announced plans to merge the unit with the agrochemicals business of Novartis and spun it off as Syngenta. In 2013 AstraZeneca sold its only non-pharma business, Aptium Oncology, an operator of cancer treatment centres in the US. This came on the heels of selling its other non-core units Astra Tech (medical devices) and Dentsply Sirona (dental implant systems).


AstraZeneca as it exists today operates as a streamlined science-lead company focused on innovative medicines. The group researches, develops, manufactures and commercialises biopharmaceuticals. Its research focuses on the following therapy areas: Oncology, cardiovascular, renal and metabolism and respiratory.

The transformation of AstraZeneca into the business that it is today started with the appointment of Menelas Pangalos as executive vice-president of biopharmaceuticals research and development (R&D) in 2010 and Pascal Soriot as Group CEO in 2012. Pangalos was formerly with Pfizer and Soriot had served as chief operating officer at Roche. At the time, AstraZeneca desperately needed a new direction given that a number of blockbuster drugs were reaching patent expiry and the group’s R&D productivity was below that of peers. In just five years, the company achieved a five-fold improvement in the proportion of pipeline molecules that have advanced from preclinical investigation to completion of Phase III clinical trials – from 4% to 19%. This improvement moved AstraZeneca well above the average success rates of 6% for small molecules.

At the heart of this transformation was a new “5R framework” (a five-dimension strategy focused on the right target, right patient, right tissue, right safety and right commercial potential) which helped guide successful and efficient drug discovery and development. A significant evolution in culture, into one that embraces open collaboration and where science thrives, has further contributed. AstraZeneca posted its first full year of sustainable growth in 2018, the first since 2009. In recognition of this turnaround Harvard Business Review selected Soriot among its Top 100 Best Performing CEOs in the world for 2019; one of only three CEOs to head a biopharmaceutical company. Pangalos, meanwhile, was awarded a knighthood in the UK’s 2020 New Year 2020 Honours list in recognition of his services to British science.

Further testament to the depth of AstraZeneca’s pipeline is the Pharmaceutical Invention Index, released by IDEA Pharma which ranked AstraZeneca’s pipeline in top position. The company also scores highly on the Pharmaceutical Innovation Index which measures, scores and celebrates a company’s ability to deliver innovation to patients.

Figure 2: Combined 2020 Pharmaceutical Innovation and Invention Indices (IDEA Pharma, 2020)


AstraZeneca is now on a rapid growth trajectory driven by an emerging pipeline that includes a number of new medicines that will reach “blockbuster” status this year, a title defined as sales in excess of US$1 billion per annum. Based on consensus estimates, we estimate around 12% compound annual growth over the next three years, which would put AstraZeneca well ahead of its peers.


Figure 3: Expected compound annual sales growth for global pharmaceutical companies (2020 - 2023) (Data source: Bloomberg, analysis: Citadel)

EvalautePharma, meanwhile, provides annual worldwide prescription drug sales estimates by therapy area (see Figure 4). Oncology as a therapy area is expected to dominate from a size and growth perspective in the coming years.

Figure 4: Worldwide prescription drug sales by evaluate therapy area: Top 15 categories and total market (by 2024, in US$ billions) (EvalautePharma, 2020)

This is important given that three blockbuster oncology drugs (Tagrisso, Imfinzi and Lynparza) form the core of AstraZeneca’s oncology division and will drive the bulk of the group’s growth over the next few years. Figure 5 shows expected three-year sales growth for AstraZeneca’s top 10 drugs (approximately 75% of total) by division.

Figure 5: AstraZeneca’s expected compound annual sales growth by drug (2020 - 2023) (Data source: Bloomberg, analysis: Citadel)


AstraZeneca is a recent addition to Global Greats and diversifies the fund’s portfolio within the pharmaceutical sector and increases exposure to oncology which we believe is an important growth area. AstraZeneca’s commitment to putting science at the forefront is paying off as its next generation of oncology drugs are well-positioned based on leading efficacy in hard-to-treat cancers. The group’s pipeline is emerging as one of the strongest in the drug sector, with a diversified product portfolio that is less dependent on one particular drug. We expect operating margins to improve based on the strong pricing power of new drugs and operating leverage which the firm should attain as its new drugs reach critical mass. AstraZeneca’s critical role in fighting the Covid-19 pandemic further underscores what we believe to be a sound investment case.