Good news or more confusion?

Good news or more confusion?

On Friday AstraZeneca (NYSE: AZN) released results from their DURATION-8 study, according to a company issued press release;

“Positive results from the Phase III DURATION-8 trial demonstrated that Bydureon (exenatide extended-release formulation) 2mg once weekly in combination with Forxiga (dapagliflozin) 10mg once daily significantly reduced blood sugar as measured by HbA1c, versus the individual medicines alone in patients with type-2 diabetes inadequately controlled on metformin.”

This shouldn’t be shocking news especially when the study compared the Bydureon/Farxiga combo to just metformin. Still the results confirm a trend that combo therapies tend to produce better results than single therapy options, again this should not surprise anyone.

The question we have will this change anything or just create more confusion? Secondarily does this help AstraZeneca in any substantial way?

While we’re not sure about the answer to the first question, we can answer the second and the answer is no. The problems with the Astra diabetes portfolio run very deep. Given the convoluted history of how this portfolio was assembled we’re not surprised. Astra has leapfrogged from one failed strategy to another. This helter skelter approach has severely handicapped the company and put them in terrible situation.

In every category in which Astra competes they are up against an established competitor. The company missed a huge opportunity with Bydureon. So today they have Onglyza, a DPP4 going against Januvia. They have Farxiga going against Invokana and Jardiance. Bydureon plays against Trulicity, Tanzeum and soon semaglutide. They don’t have any insulin offerings and even if they did these products would also go up against well-established formidable competitors.

Now we hate to be redundant but Pascal Soriot has to be kicking himself for not selling the company when he had the chance. He has to regret mentioning the diabetes portfolio as one reason the company shouldn’t sell. Honestly when Astra was in play we thought Pascal was doing what almost every CEO does, trying to get a larger multiple. We thought he would eventually come to his senses and realize that offers don’t come along every day. That he really didn’t believe that the diabetes portfolio could overcome the issues it faces especially since the unit has never executed that well in the past.

Now he’s being forced to run the company and make something out of the mess that’s going on in diabetes.

Frankly we don’t see a path forward at least not one that offers much hope. The diabetes drug market is commoditizing. The portfolio is full of me-too copycat drugs none of which hold a leadership position. They are competing against companies that actually know what they are doing. Their pipeline is weak. And their strategy; well we’re not sure they have one. Other than that Mrs. Lincoln how was the play?

It’s fitting that Pascal was mentioned as the leading candidate to take takeover at Sanofi (NYSE: SNY) after Serge beheaded Viehbacher. Rather than take on the diabetes mess at Sanofi, Pascal decided to make one of his very own. A mess which along with his other missteps could well end up costing him his job.

Yet, just as Viehbacher landed on his feet with a big fat severance package, Pascal won’t suffer much either. This unfortunately is the crazy world we live in where CEO’s no matter what aren’t held accountable for screwing up.

Even crazier is how so many people are willing to give him a pass and are not holding him accountable. Heck we may not big fans of Olivier but at least he recognized there was a problem and is taking steps to fix the problem. While we might disagree with these steps and don’t hold out much hope that he’ll be successful at least he’s trying. Not sure we can say the same for Pascal as in order to fix a problem he must acknowledge a problem exists.

Some people may say we are being overly harsh to which we say something Momma Kliff was very fond of saying; “If you want a friend get a dog.” This isn’t personal this is about creating stakeholder value not destroying it. This is about acknowledging mistakes and fixing them.

Being a CEO of any major company isn’t unlike being a head coach of a football team. As most coaches will note they get too much credit when the team wins and too much blame when they lose. Yet they will also acknowledge this comes with the job and is why they make the big bucks. And every coach knows that the countdown to the day they are fired starts about 10 minutes after the day they are hired, this also comes with the job. Coaches are measured by wins and losses, no matter how nice they are, no matter how smart they are; it’s win or be gone.

We’re beginning to wonder if the AstraZeneca board, the people who are supposed to represent the company’s stakeholders, understand this or are they practicing willful blindness?