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Should Pfizer Be Worried about AstraZeneca's Recent Stock Rise?

AstraZeneca reported upbeat financials for the third quarter and raised its guidance for the year on the back of lower-than-anticipated generic competition for its drug Nexium.

AstraZeneca PLC (NYSE: AZN) raised its 2014 sales forecast for the second quarter in a row as the delayed arrival of generic copies of its Nexium drug in the United States kept cash flowing from the heartburn and ulcer pill.

The second largest drugmaker in Britain was recently in the news for rejecting a $118 billion takeover bid from Pfizer Inc. (NYSE: PFE), saying it undervalued the company. While a six-month cooling off period for Pfizer mandated under U.K. takeover rules expires on Nov. 26, a re-bid from Pfizer doesn’t seem likely.

That doesn’t bother AstraZeneca’s CEO Pascal Soriot, however, saying the company can create value without a buyout.

AstraZeneca’s stock has climbed to the price that Pfizer initially offered to buy the company for, and AstraZeneca now expects sales to grow in low single digits at constant exchange rates this year, after previously predicting they would be flat.

Soriot said he would use the better financial outlook to accelerate investment in new drugs and sought to reassure shareholders that new investments would be managed carefully by predicting that earnings next year would be no worse than the lower end of the range expected for 2014.

A Focus on Cancer

With Soriot building the company’s new drug pipeline, a large focus has been placed on combating cancer.

AstraZeneca is vying with rivals such as Bristol-Myers Squibb, Merck & Co and Roche in immunotherapy treatments, which boost the immune system to fight tumors, according to Business Insider.

At a cancer conference in September, AtraZeneca presented early drug data that showed promise. More results are expected at an investor day on Nov. 18. On this day, analysts believe that AstraZeneca is likely to give details of new experimental drugs that are set to enter clinical trials.

Increase in Sales

Sales in the third quarter rose 5 percent to $6.54 billion, generating core earnings down 13 percent at $1.05 a share. Industry analysts, on average, had forecast sales in the quarter of $6.41 billion and earnings of $1.03 a share, according to Thomson Reuters.

There isn’t a huge threat to Pfizer, one of the largest pharmaceutical companies in the world, but AstraZeneca’s rise in stock value does make the company more attractive and might have Pfizer reconsidering making another bid come Nov. 18.  

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