Neil Woodford: Pfizer has plainly recognised that AstraZeneca has altered massively for the far better

He backed the pharma giant and its revival is comprehensive. Now Richard Evans finds that Neil Woodford is nevertheless ploughing his personal furrow – and aims to be ‘here for decades’


Two hrs into his new task final Wednesday, Neil Woodford took a contact from the head of Pfizer, the American drugs firm that needs to get AstraZeneca, one particular of the crown jewels of British business.

Pfizer’s boss, Ian Read through, wished to find out if Woodford would support his company’s bid for AstraZeneca, the UK’s second greatest pharmaceuticals group. Woodford, who has established Woodford Investment Management (WIM) right after a prolonged and illustrious profession at Invesco Perpetual, advised Go through that his £47-a-share bid for Astra wasn’t generous adequate.

The fund manager — 1 of the most significant, if not the greatest, title in institutional investment in the City of London — has also spoken in latest days to Pascal Soriot, Astra’s chief executive. Analysts have stated that Pfizer may have to provide as considerably as £56 a share for the British pharma giant. On Friday the US group raised its bid to £50 a share but Mr Woodford explained he supported the Astra board’s see that this still undervalued the organization.

Mr Woodford’s involvement in AstraZeneca, which was formed by the merger in 1999 of Zeneca, the former ICI medicines division, and Sweden’s Astra, goes back a extended way, and he can claim to have played a main position in its recent rehabilitation in the eyes of traders, which culminated in Pfizer’s bid.

Speaking to The Agenciesthis weekend, he disclosed that he was behind the departure of Astra’s earlier chairman, Louis Schweitzer, in 2012 and his substitute by Leif Johansson.

“I had a vision of how the sector could provide far more worth for shareholders,” Mr Woodford stated. “Drugs businesses required to rethink the way they have been being run and as a outcome the leadership essential to alter. By means of Invesco, I was a single of the leading two shareholders in Astra at the time, and with others place strain on the company to appoint a new chairman.

“The organization has now transformed massively for the better. It has a considerably brighter long term — and this is starting to be recognised by the industry. Plainly Pfizer has recognised it as well.”

For a lot of the past decade, drugs organizations have been amid the most unloved regions of the stock marketplace. But Woodford famously ploughs his own furrow.

“The fund management market is complete of pseudo-science and mumbo-jumbo but my job is really extremely basic: it is to locate companies that are undervalued by the stock industry,” he explained. “It was clear to me when I purchased AstraZeneca about 5 many years ago that it was one of people organizations.

“The market place was anxious that drug patents have been about to expire and deprive the companies of a lot of their revenues — the so-referred to as ‘patent cliff’. Traders ended up marking pharma shares down to ludicrously reduced amounts.”

Of program, Astra and its rivals spend billions of pounds every year on their analysis and growth programmes in an try to uncover new medication. But, as Woodford place it, “over the best portion of a decade the marketplace grew to become concerned that the drugs companies’ R&ampD was flawed”.

“This resulted in a flight of capital and the shares had been marked down relative to earnings and the wider market place. For me, this share price tag underperformance made the company a fantastic buying possibility.

“I wasn’t even taking a chance that the R&ampD actually was incapable of making new medication due to the fact the share cost had fallen so far that even the current product portfolio would generate enough funds to justify the price I paid for my holding. The R&ampD was in there for practically nothing.”

And Woodford did not share the wider market’s low view of Astra’s study efforts. “The notion that the drugs industry had reached the end of innovation was ridiculous,” he mentioned. “In fact, the dip in R&ampD productivity was fully understandable. The total procedure of drug discovery was changing — it was moving from a strategy based mostly on chemistry to a single based on biology, following the decoding of the human genome.

“Cancer still kills men and women, other diseases nonetheless destroy folks. It is not as if we have conquered all these factors – there is a enormous un-met health-related require. The process of scientific discovery changes above time but vibrant scientists will discover a way to deliver the well being advantages that folks are ready to shell out for.”

He extra: “The market place was disregarding all this — it noticed the drugs firms’ huge R&ampD investing as just a giant bonfire of billions of dollar expenses. It noticed investigation as an cost, but it was in fact an investment.”

Woodford’s extended-phrase belief in AstraZeneca’s prospects — it was the largest holding in his Invesco money for years, without a doubt the biggest of his career — typifies his willingness to go towards the grain.

He famously refused to take part in the frenzy for technological innovation stocks in the course of the dotcom boom, attracting such criticism from investors who missed out on the bubble’s early gains that he was inside of months of dropping his task, some observers say, and sold his financial institution shares effectively ahead of they imploded in the economic crisis.

At the moment he has worries about the utilities sector, even though he still ideas to invest in it via the new company’s first fund, Woodford Equity Income. “It’s clear that politicians’ focus on these companies has resulted in massive uncertainty in an market that depends hugely on consistency,” he said.

“Because of their ill-thought-by means of proposals, there is not adequate investment in capability. As a result the British economic system will encounter an energy crunch, with the probability of electrical power cuts or rationing.”

Woodford’s lengthy-phrase technique extends to his own career. He ran Invesco’s popular Income and Substantial Revenue money for much more than 25 years, generating gains of 1,839pc and two,213pc respectively. He has related ideas at the new business.

“I intend to be here for decades to come. A limited timescale at Woodford Investment Management has not even entered my thinking,” the 54-12 months-previous mentioned. “My very best many years as a fund manager are in front of me. I’ve learnt a good deal from my successes and failures. I’m a much better fund manager now than I was 25 years ago.”

He extra that his ambition was to construct a lasting enterprise of important size, rather than a little “boutique”.

“But will it be as huge as Invesco? I don’t know about that.” He explained he had no intention of floating it on the stock market, however. Even though he has a stake in the organization — which was backed by Peter Dubens’ Oakley Capital — he refused to be drawn on its dimension.

The business is likely to launch far more funds in the potential, with a worldwide equity earnings fund the clear first candidate. Bond funds are very likely to follow.

After so long at Invesco, the place he managed tens of billions of pounds, why did he decide to quit last year and join a new business?

“I want to focus on what I do greatest — managing money. When you function for an established business there will constantly be a creep of distracting bureaucracy – it’s the very same in all industries. The wonderful benefit of a clean sheet of paper is that you can learn from the things that did not go as well as you’d have liked even though trying to keep the things that did operate effectively.”

It would be a mistake to see the business as a one particular-guy band, nevertheless. Certainly, WIM hired 3 of Woodford’s former Invesco colleagues last week. “I require a staff around me of the greatest talent I can locate, and people 3 are element of that,” he added.

Woodford will also rely on other individuals to run the firm itself, with former Invesco colleague Craig Newman as chief executive. “My occupation is to analyse companies. I have extremely capable colleagues to search following customers and the company itself.”

The launch of the new firm coincided with an £18m fine imposed on his former employer relating to breaches of the City regulator’s guidelines, some of which concerned his personal funds. Some of the breaches involved the use of derivatives in the money, which was not disclosed to investors prominently enough, the Monetary Perform Authority (FCA) discovered. Others concerned breaches in the limits on the dimension of fund holdings.

Woodford said: “The 39-page FCA report provides clear background behind the fine. The report helps make it clear that I was permitted to use derivatives and I remained effectively within the limits permissible.”

Neil Woodford: CV

Task: Partner, head of investment at Woodford Investment Management Loved ones: Two kids with partner Interests: Being a very good parent, trying to keep fit Auto: Selection Rover Sport Favourite guide: Lord of the Rings Favourite film: The Shawshank Redemption Not a lot of people know that: He is about to consider component in his initial equestrian competitors