Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.


We currently rate shares of AstraZeneca PLC (AZN - Analyst Report) a Hold with a $38 price target. The company is facing a number of challenges as it enters 2009, most notably generic competition to Toprol-XL, Nexium, Casodex, and Pulmicort.

The just-announced increase to the cost-cutting program will aid EPS in the near-term, but we do not believe this will be enough to compensate for continued revenue deterioration beyond 2010. Atacand and Arimidex will both be subject to generic competition in 2010, then Seroquel and Symbicort lose U.S. patent protection in 2011 and 2012, respectively. This puts significantly more pressure on the company to commercialize its late-stage pipeline.

The MedImmune acquisition significantly beefs up the company's pipeline, which should aid in this effort through its sizable biologics platform. We expect management to continue to look for additional licensing and outsourcing opportunities in order to reduce operating leverage and offset some of the softer pricing due to generic competition.

Financial leverage should also come down as the company expects to reduce total debt by $3 billion to $4 billion over the next two to three years. The company also suspended share repurchases for 2009. This should make the company more nimble and enable it to use cash flow to reinvest in the business. Deleveraging the balance sheet should also help AstraZeneca weather the tightening in the credit markets or a prolonged downturn in global economy. We also believe that the company, with a healthier balance sheet, could tap the credit market to finance a large acquisition.

As far as the pipeline, the company currently has ten projects in phase III trials or filed for registration. Their goal is to file up to three new license applications per year and bring at least two new drugs to market per year through 2010. AstraZeneca expects to make four regulatory filings in 2009; Zactima, PN-400, Brilinta and Crestor-TriLipix. We note, however, that Zactima was pushed back from an expected filing during 2008.

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 out-performance given the low expectations. We think the shares trade a relatively attractive level given the potential that management can grow long-term EPS through additional deal-making and cost-cutting. We rate the shares a Hold with a $38 price target, representing 7.0x our 2009 EPS forecast of $5.41.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GROUP DXYN 15.84 +7.90%
BOFL HOLDING BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%