Having built a big operation during the pandemic it could stick or twist but either way investors will soon want a decision
Last modified on Tue 15 Jun 2021 14.51 EDT
What’s AstraZeneca’s strategy in Covid treatments? In the short term, there is no confusion: the company will continue pumping out vaccine doses, will keep signing partnerships and will try to ignore churlishness in Brussels.
The long term, though, is another matter. Being big in vaccines was never part of chief executive Pascal Soriot’s grand plan for AstraZeneca, so there’s a decision to be made about what to do with an operation that has been built almost by accident during a global emergency.
The picture became slightly less clear on Tuesday as a Covid-19 antibody treatment, entirely separate from the vaccine, suffered a setback in clinical trials when it didn’t hit its main targets. Studies will continue, and there are some grounds to think the treatment could still be useful if given early to unvaccinated adults who have been exposed to the virus. But the nagging question remains: what’s the long-term vision?
Unlike Pfizer and Moderna, AstraZeneca isn’t making a profit from its vaccine currently (and may never) since it pledged to produce “at cost” during the pandemic. But it has acquired production expertise that could be valuable in developing other vaccines in non-pandemic fields. That’s the argument for doubling down, being opportunistic and expanding a vaccine portfolio that previously amounted to little more than a flu jab.
Yet committing serious sums would take the group down an unintended road. Soriot’s strategy in the last decade has been directed at specialist clinical products, especially in cancer. The latest $39bn (£28bn) acquisition of US biotech firm Alexion, a rare disease specialist, is even more niche. Vaccines are almost the opposite: even under normal commercial conditions, they are high-volume, low-margin businesses.
But, if the long-term route were to be an exit, how to get out? Selling to a longstanding vaccine producer, such as GlaxoSmithKline or Sanofi, would be one way, but possibly tricky if the main product can’t be sold at profitable prices. Or hand the operation to an international health organisation such as Gavi? Very noble, but the shareholders may expect to see a financial return.
The stick or twist question, as it were, would be more pressing if AstraZeneca’s core business had been distracted by the pandemic push. There is no evidence of that: recent trading figures were strong, so is the share price, and the Alexion purchase has been well received. One of these days, though, the board will have to share its thinking on the eventual Covid strategy. The issue is bubbling away and investors will want to hear a plan.
Housebuilders comfortable while hospitality begs for help
Small hospitality companies, pleading with government for more support to get through the extended round of Covid restrictions, must look at the big housebuilders and weep.
They will see an industry with fat profit margins and strong cashflow that was given an unnecessary helping hand from the chancellor in his spring budget in the form of an extension of the stamp duty holiday for buyers on the first £500,000 of the purchase price. The perk will start to be wound down at the end of this month – but not before time.
“Demand for larger, higher-value homes remains encouraging,” reported Bellway on Tuesday, lifting its guidance for its average selling price in the current financial year to more than £300,000. That same growth in house prices is offsetting sector-wide pressures on the cost of labour and material “and in turn, helping to preserve site-based margins”. It looks very comfortable.
By way of reminder, the extension of the stamp duty holiday was budgeted by the Treasury in March to cost £1.3bn in the current tax year. With transactions running ahead of estimates, nobody should be surprised if the final figure ends up closer to £2bn. After all, the housing market is “on fire”, as the Bank of England’s chief economist put it recently.
The pub and restaurant sector – also crucial for driving domestic recovery – may reasonably wonder what it did wrong. Its case for additional support today looks far stronger than the housebuilders’ plea did in March.
Morgan Stanley first to call time on home working
“If you can go into a restaurant in New York city, you can come into the office and we want you in the office,” Morgan Stanley’s chief executive, James Gorman, told his Wall Street staff this week.
It’s one bank, in one city, but we may be hearing variations on Gorman’s theme in coming months. The hype around the supposedly unstoppable rise of working from home feels overdone. Some big employers in well-paid industries will fight it. Many will succeed.
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