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AstraZeneca Battling Generics
AstraZeneca PLC’s (AZN - Snapshot Report) key drugs such as Crestor (cholesterol), Seroquel (schizophrenia) and Symbicort (asthma) will continue to be the driving force of growth until the company can commercialize its pipeline. Company-wide revenue growth will slow considerably over the next few years due to generic competition to heart drug Toprol-XL and ulcer pill Nexium. We currently rate shares of AstraZeneca a Hold.
The management is determined to grow earnings through a combination of expanding the top-line and cost-cutting, share buybacks and productivity initiatives. This is in contrast to many of AstraZeneca’s large-cap pharma brethren which are wringing out earnings solely through very significant cost-cutting strategies with virtually no revenue growth.
The management appears to have clearly defined goals in regards to building out its pipeline and getting more drugs to market. They currently have twelve projects in phase III trials or filed for registration. Their goal is to file up to three new license applications per year and bring two new drugs to market per year through 2010.
Although we believe the company is faced with some significant hurdles in the next few years, we think that AstraZeneca offers a compelling case for growth beyond our current expectations. We think the shares trade a relatively attractive level and have a $52 price target, representing 10.8x our 2008 EPS forecast of $4.80.
Read the full analyst report on AZN
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| Market Summary | Sep 05, 2010 22:17 pm ET |
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