Analyst: Something's got to give with AstraZeneca

Bernstein Research analyst Tim Anderson said in a note to clients that something has to give with AstraZeneca.

The English drugmaker, which has a big operation in Wilmington and Newark, Del., has struggled to deal with the common ailments of big pharma companies: loss of patent protection for top-selling drugs, pipelines not producing blockbuster replacements and pricing pressure from public and private insurers.

The company has cut jobs several times in the last two years.

The synopsis of Anderson's note is here and the "we" refers to Anderson and Bernstein Research:

• AstraZeneca is a consensus "sell" with the lowest valuation of the European Union/U.S. names we cover. This is because its future financial profile is troubling due to a long list of future patent expiries and also a thin pipeline. Something seems destined to change.

• Two very different strategies sit before the company. The first is for AstraZeneca to cut down its cost structure even more, but we think it is running out of room. The second is for AstraZeneca to start making acquisitions (which we think is the more likely option).

• We run merger and acquisition scenarios of three different sizes to assess their financial impact:

a) Buy Amylin for $4.5 billion.

b) Buy Shire, which has a big Philadelphia-area presence, for $30 billion.

c) Buy Abbott's drug business for $52 billion.

Anderson didn't say that would happen. He just ran numbers on the possibilities, but also suggested acquisitions under $10 billion are most likely.

Meanwhile, the patent problem was brought home Friday morning when AstraZeneca said in a statement on its website that the U.S. Food and Drug Administration had denied AstraZeneca's request to delay approval of generic competitors to its top-selling antipsychotic Seroquel over labeling issues.