What's in the Pipeline for AstraZeneca

AstraZeneca's continued strong development of its pipeline is helping the firm mitigate the negative trend of major patent losses

Damien Conover, CFA 7 November, 2014 | 10:59AM
Facebook Twitter LinkedIn

Aided by delayed generics for gastrointestinal drug Nexium, AstraZeneca (AZN) posted strong third-quarter results ahead of our and consensus expectations. Since the delayed generic competition to Nexium is likely short-lived, generics now expected in 2015, we don't expect any material change to our fair value estimate of £34 based on the results. We continue to see AstraZeneca shares as slightly overvalued with a likely takeover premium still in the stock as Pfizer (PFE) may return to bid for the firm at least at the last offer of £55. As a reminder, our fair value estimate does not include any takeover premium.

Turning to the moat, AstraZeneca's continued strong development of its pipeline is helping the firm mitigate the negative trend of major patent losses. While over the next two years it faces patent loss on Symbicort - 14% of sales, Nexium  - 14% of sales, and Crestor - 21% of sales, the major pipeline advancements should stabilize the top line by 2017.

We believe the most potential lies with recently launched diabetes drug Forxiga. However, we project 2017 total company sales of $23 billion, below management guidance of $25.7 billion as we believe next-generation products will have slower launch trajectories given the increasingly restrictive U.S. payer environment. Further, the increased pricing pressure in the U.S. is weighing on the company's moat as it guided to a 2015 negative single-digit price hit in the U.S., well below the typical mid-single digit price increase.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
AstraZeneca PLC8,994.00 GBX-0.10Rating
Pfizer Inc42.97 USD-1.35Rating

About Author

Damien Conover, CFA  is an equity analyst and associate director at Morningstar.