AstraZeneca in £410m bid to lift drugs pipeline

AstraZeneca signed deals worth a potential $800m (£410m) for two smaller drug companies yesterday in a further attempt to boost its ailing pipeline.

The UK's second largest pharmaceutical company is to report full-year results today and analysts are forecasting strong growth, with pre-tax profits of around $8.5bn compared with $6.7bn last year. Sales are expected to rise 9 per cent to $26.2bn. But the outlook for 2007 is looking "less rosy", analysts say.

The company's performance has hinged on five key products, including its breast cancer treatment Arimidex and cholesterol drug Crestor, which are expected to continue to deliver for three to four years.

The challenge for the company lies ahead. Its best-selling heartburn drug Nexium and its antipsychotic drug Seroquel have both received patent challenges and a copycat version of its heart drug Toprol XL has been launched.

Yesterday, AstraZeneca signed a deal with the Harlow-based Argenta for $21m plus $500m in future milestone payments to develop a drug to treat chronic obstructive pulmonary disease (COPD) or smokers' cough, which affects around 10 per cent of adults aged over 40 globally. The World Health Organisation estimates that COPD will be the third greatest killer by 2020.

It also agreed to pay the biotech company Palatin Technologies $10m up front and up to $300m in milestone payments to develop an obesity drug, an area AstraZeneca has made one of its key priorities. Obesity affects more than 1.1 billion adults and more than 150 million children worldwide and is the second leading cause of preventable death after smoking. Both areas of research have the potential to produce money-spinners but not for another six to eight years.

Julien Dormois, an analyst at Bryan Garnier investment bank, said AstraZeneca has "the poorest pipeline among its European peers with only 18 products in second or third stage of development". This compares with 56 projects at GlaxoSmithKline. With drugs taking an average of 10 years to get to market, pharmaceuticals are having to cast their nets further afield for a future blockbuster.

Dr Jonathan Senior, at Evolution Securities, said to sustain growth beyond 2010, and to fill the gap until the internal early stage pipeline can take up the running, AstraZeneca "will need a flow of externally generated products".