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AstraZeneca fights for turf
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June 13, 2000: 6:08 a.m. ET
Patent expirations, cholesterol drug fight promise to dominate firm's future
By Staff Writer Martha Slud
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NEW YORK (CNNfn) - The chairman of AstraZeneca PLC, the Anglo-Swedish offspring of a drug industry merger a year ago, doesn't see the need to find any more partners -- even in the face of further industry consolidation that could threaten its position among the pharmaceutical leaders.
AstraZeneca (AZN: Research, Estimates) CEO Tom McKillop, in an interview with CNNfn.com, insists he's not worried that his company needs to get any bigger in order to compete with the new industry behemoths.
"I'm not at all frightened," said the Scottish-born McKillop, 57, a chemist who served as a top executive at Zeneca before the merger with Astra. "We are big enough now -- we now have the scale from this merger to compete."
When Sweden's Astra AB and Britain's Zeneca Group combined last year in a $35 billion deal, the company edged into the lead spot in the drug industry, in terms of worldwide market share, slightly ahead of France's Aventis SA (AVE: Research, Estimates) and U.S.-based Merck & Co. (MRK: Research, Estimates), according to data from research firm IMS Health.
But since then, Britain's Glaxo Wellcome Plc (GLX: Research, Estimates) and SmithKline Beecham (SBH: Research, Estimates) have announced plans to merge in a deal that will create the world's biggest pharmaceutical company, while Pfizer Inc. (PFE: Research, Estimates) and Warner-Lambert Co. (WLA: Research, Estimates) are also teaming up, promising to create the No. 2 global drug company. Both deals are pending.
 "The two most important features for any pharmaceutical company, I think, are speed and creativity," he said. "These are frankly qualities that you do not associate with big companies generally. For us, the challenge at AstraZeneca is how do we make sure that in becoming a lot bigger, we don't become a cumbersome, deadening environment? I think if you got a lot bigger you'd have to be very sure the party you are getting a lot bigger with had the same kind of approach."
A potential merger certainly doesn't seem to be at the top of AstraZeneca's to-do list these days. A major cloud hangs over the company -- the expected loss of exclusivity on key patents in the United States next year for heartburn and ulcer medication Prilosec, the world's biggest-selling prescription medicine. The drug, known as Losec outside of the United States, already has lost its patent protection in several European countries.
Industry analysts have estimated that the introduction of cheaper versions of Prilosec could trigger as much as a 15 percent drop in AstraZeneca's sales.
AstraZeneca is mired in litigation against generic competitors hoping to market their versions of Prilosec. McKillop says he's confident that legal evidence will show that the proposed generic alternatives to Prilosec are based on AstraZeneca's proprietary technology. While the U.S. patent on the drug's active ingredients expires in April 2001, the intellectual property patent behind the drug's formulation runs through 2007.
"We will fight in the courts," McKillop said. "We will argue very strongly that unless a generic manufacturer has discovered its own way that is free of our patents of formulating the product, that they're in breach of our patents. We think we have a good chance of winning."
AstraZeneca, meanwhile, has developed a "next-generation" ulcer medication, called Nexium. But although the company has released clinical data showing that the treatment can be more effective and quicker-acting than Prilosec, it remains to be seen whether doctors will prescribe the brand-name drug instead of generic versions of Prilosec.
"Nexium is in our view clearly a better drug. We have demonstrated that in our clinical trials," McKillop said. "We are preparing a very, very big commercial commitment to this -- it will be a big launch."
Pending regulatory approval, the company hopes to introduce the drug later this year in Europe and in early 2001 in the United States.
AstraZeneca wants to take on Lipitor
Meanwhile, AstraZeneca also is working on a new cholesterol medicine, known by research number ZD4522. The company touts the experimental treatment as potentially more potent and effective than Lipitor, the blockbuster cholesterol-lowering drug made by Warner-Lambert Co. Lipitor, the centerpiece of Warner-Lambert's drug portfolio with sales of about $3.7 billion last year, was at the heart of Pfizer Inc.'s takeover of the company.
AstraZeneca's yet-unnamed "superstatin," or cholesterol-lowering drug, can better reduce LDL -- the so-called "bad" cholesterol -- and better raise HDL -- "good" cholesterol -- than Lipitor, McKillop said. Data on Phase II clinical trials of the drug are expected to be released later this month, he said. The drug then would require successful completion of a larger, Phase III trial.
"I am confident that it is going to come out and demonstrate that we have a big winner in this superstatin," McKillop said of the latest data.
McKillop says he's confident that the company will be able to grab a significant portion of the highly lucrative cholesterol market -- which is expected to rise to as much as $20 billion over the next five years. If the clinical trials are successful, the heart drug could be on the market by early 2002, he said.
"The history of our industry tells you very, very clearly that the better drug wins," he said. "If you get a drug that has real advantages, it gets used -- and we believe this drug will have real advantages."
But can AstraZeneca compete with the marketing muscle of the new Pfizer?
"We anticipate that Pfizer-Warner will make a big commitment in sales and marketing terms to defend Lipitor," he said. "They have a huge amount of business to defend, so we fully anticipate that. But we will have to be prepared to match that."
McKillop said the company's plans are on track to spin off its agrochemical division and then merge it with the agribusiness arm of Novartis AG later this year. The new company, to be called Syngenta, would be the biggest agrochemical business in the world.
 The idea behind the spinoff is to focus AstraZeneca exclusively on pharmaceuticals, McKillop said, adding that it no longer makes sense to keep the two units together.
"There are very few synergies between an agrochemicals business and a pharmaceutical business -- the customers are different, the scale of manufacturing is different," he said. "We believed that there would be a lot of consolidation taking place in the agrochemicals industry. If you follow that logic, and accept that logic, you say 'Why don't we control the consolidation in the sense of choosing our partner? Why don't we set out to make the preeminent agrochemical company.' And that's essentially what we've done."
Like other members of the scientific community, McKillop says he's excited by developments in the field of genomics -- the study of the structure and function of human genes. In the next few days or weeks, private researchers in the United States are expected to announce that they have completed a "rough draft" of a map of the human genome -- a guidebook of all of the genes in the human body.
"This is one of the scientific breakthroughs of greatest importance in the whole history of mankind -- that goes without saying," he said. "I think it's often misunderstood though. I think some people think when we've got the human genome, that's it."
He said that it will rest with pharmaceutical and biotech companies to design drugs based on this flood of genetic information, a process that requires intense research and chemical insight. "Genomics is not the end of the story, but it is a key enabling discovery," he said.
AstraZeneca stock trades in the United States through American depositary receipts (ADR). The company's ADRs gained 3/4 to 41-15/16 in trading Monday. 
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