Outlook: Zeneca has been slow to change

When ICI and Zeneca demerged almost five years ago there seemed little doubt as to which company would offer investors the most excitement. How could the yawn-making world of commodity chemicals governed by little other than economic cycles compete with the frenetic pace of change in the pharmaceutical industry, where innovations in biotechnology and genetic research were piling on competitive pressure and forcing the major drug companies to get nimble or get taken over?

However, as Zeneca yesterday defended itself against accusations that it has failed to respond quickly enough to market changes and has let its drug pipeline run dry, it is Zeneca, not ICI, which looks unable to throw off the shackles of its old corporate identity. While ICI, under ex-Unilever man Charles Miller Smith, has been busy reinventing itself, swapping at record speed commodities business for high-margin speciality chemicals, Zeneca looks like it has only just caught the boat on many market developments - biotechnology alliances, genomics, for example - which have turned its more aggressive competitors Glaxo Wellcome and SmithKline Beecham into world forces in the drug industry.

Not surprisingly Zeneca has been a much better investment than ICI. Over the past four years, shares in Zeneca have outperformed the market by almost 70 per cent, compared to a dismal 21 per cent underperformance from ICI. However the chemicals and drugs sectors naturally attract different share price ratings. Moreover, much of Zeneca's share price growth has been driven by bid speculation.

There aren't many medium-sized drug companies left to buy and in an industry where global consolidation makes sense, Zeneca has been a natural bid target. Unfortunately, potential buyers look in short supply. Roche has splashed much of its cash on other acquisitions and Glaxo would have to think hard about another hostile bid, given the disruption that integrating Wellcome caused. Without a bidder, Zeneca looks exposed. Though it tried hard yesterday to point out how many new products it had coming on line, most of what it has to offer are new versions of existing drugs rather than a full pipeline of late-stage products ready to launch.

Zeneca's main problem is management in general and the congenial Sir David Barnes in particular. Those who know the company talk of an English gentleman's club atmosphere where never a harsh word is raised. In the absence of a bidder, things plainly need to change.

Start your day with The Independent, sign up for daily news emails
Voices
There will be a chance to bid for a rare example of the SAS Diary, collated by a former member of the regiment in the aftermath of World War II but only published – in a limited run of just 5,000 – in 2011
charity appealTime is running out to secure your favourite lot as our auction closes at 2pm today
News
people
Arts and Entertainment
Bianca Miller and Katie Bulmer-Cooke are scrutinised by Lord Sugar's aide Nick Hewer on The Apprentice final
tvBut Bianca Miller has taken on board his comments over pricing
News
Elton John and David Furnish exchange marriage vows
peopleSinger posts pictures of nuptials throughout the day
PROMOTED VIDEO
News
in picturesWounded and mangy husky puppy rescued from dump
News
File: James Woods attends the 52nd New York Film Festival at Walter Reade Theater on September 27, 2014
peopleActor was tweeting in wake of NYPD police shooting
News
newsAstonishing moment a kangaroo takes down a drone
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

SThree: Graduate Recruitment Consultant

£20000 - £25000 per annum + OTE £35000: SThree: SThree are a global FTSE 250 b...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K - £45K: SThree: SThree Group have been we...

Day In a Page

Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'