Why Is AstraZeneca Making So Many Unforced Errors?
(Bloomberg Opinion) -- Why is AstraZeneca Plc making so many unforced errors in its attempt to distribute billions of doses of Covid vaccines to the world at minimal cost? Once the pandemic is under control, the Anglo-Swedish drugmaker should examine whether there’s a problem with the way it makes decisions.
AstraZeneca agreed in April to help develop, manufacture and distribute Oxford University’s jab against Covid-19. It had no business in vaccines: The aim was to bring its resources to the pandemic fight on a non-profit basis. These assets include a global network and established capabilities in running large clinical trials. The outcome is millions of jabs administered within a year. However, the lack of vaccine expertise, an overconfidence in what the firm could achieve and a naivety about the politics of the task cannot be brushed aside.
One issue has been communication of scientific results. November data from trials in the U.K. and Brazil generated confusion over efficacy. This week, there were doubts over a subsequent trial in the U.S. and South America that was supposed to clear up the question. AstraZeneca announced interim findings of the U.S. study on Monday saying the Oxford jab had 79% efficacy preventing symptomatic Covid-19. Yet an independent panel that assisted with the trial questioned whether the conclusions were reliable, since the analysis didn’t include the most recent data.
It’s not controversial to release conclusions from an interim analysis up to a certain point, in this case Feb. 17. AstraZeneca has since said that including the most recent data lowers the efficacy to 76%. The difference is small. The question remains whether this latest confusion could have been avoided with better liaison with the U.S. supervisors before the first announcement.
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The second issue concerns over-optimism in its ability to supply doses. Vaccines are hard to make, as AstraZeneca is finding. The productivity of identical plants can vary for no obvious reason, according to analysts at UBS Group AG. As a result, the drugmaker is aiming to provide just 100 million doses to the EU in the first half of 2021, out of 400 million ordered.
AstraZeneca’s supply agreements haven’t proved helpful in managing this scenario. It may be that its contract with the EU allows for giving preferential treatment to an earlier deal struck with the U.K. But that doesn’t resolve the vaccine trade war that’s broken out. Either AstraZeneca was naive to think that the small print dealt with scarce supply, or it didn’t think the situation would arise in the first place.
The EU can beat up AstraZeneca all it likes but that won’t suddenly make the manufacturing processes work any better. Its energy may be better focused on alternative vaccine supply.
Where should AstraZeneca go from here? One worry is that tension with politicians and regulators will damage the business long-term. If AstraZeneca has a real blockbuster drug up its sleeve at some point, the data for that medicine will be what counts and recent events really shouldn’t be relevant. Still, its relationship with regulators clearly needs work. As for the EU standoff, it seems hard to resolve without help from the U.K. government — which may be coming.
A broader question is whether AstraZeneca’s internal processes support a realistic evaluation of projects. True, the vaccine endeavor is gargantuan and unprecedented. But it’s getting harder to avoid parallels with a couple of recent disappointments in drug prospects in its core business, where the company allowed high expectations to build. AstraZeneca also happens to be more bullish than analysts about the sales boost from its $39 billion purchase of Alexion Pharmaceuticals Inc.
You can see where corporate optimism might come from. Chief Executive Officer Pascal Soriot thwarted a takeover by Pfizer Inc. in 2014, promising to return the company to growth amid a spate of patent expiries. He is delivering that turnaround. AstraZeneca’s pipeline is the envy of the industry.
Drug discovery doesn’t happen unless CEOs like Soriot have the confidence to take big risks. With the vaccine already pioneered by Oxford, the risk-taking here related to delivery. That was better suited to companies producing vaccines commercially. Having now climbed a steep learning curve, it might actually make sense for AstraZeneca to make a business of this.
But there’s a tougher question facing the board: whether the confidence that has fueled the company’s huge contribution to the virus effort may also be an Achilles’ heel.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.
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