AstraZeneca a Hold on Generics

AstraZeneca PLC (AZN - Analyst Report) is engaged in the research, development, manufacturing and marketing of ethical (prescription) pharmaceutical products. The company ranks among the top pharmaceutical companies in the world based on revenues and global sales force. It is a leader in cardiovascular, cancer and gastrointestinal drugs.

Key drugs such as Crestor, Seroquel and Symbicort will continue to be the driving force of growth until the company can commercialize its pipeline. Generic competition will eat into revenue growth, but productivity initiatives should pay off in the form of healthier margins and mid-single digit earnings growth for the next few years.

Although we believe the company is faced with some significant hurdles, we think that AstraZeneca offers a compelling case for growth beyond our current expectations. We think the shares trade at a relatively attractive level given the potential that management can deliver on its goals and significantly add to topline growth through pipeline successes.

We believe the stock offers fair valuation and rate the shares a Hold with a $47 price target, representing 9.9x our 2008 EPS forecast of $4.77. This is well below the large-cap pharmaceutical peer-group average of 13.6x.

Jason Napodano, CFA contributed to this report.

Read the full analyst report on AZN