AstraZeneca Fairly Valued after Solid Q3

The Big Pharma group posted a solid third quarter, with generic drugs continuing to weigh on growth while its pipeline develops further

Damien Conover, CFA 10 November, 2015 | 9:00AM

AstraZeneca (AZN) posted third-quarter results largely in line with our expectations, and we don’t expect any significant changes to our fair value estimate of £41.60 per share. At the current market price, we view Astra as fairly valued, with the market correctly valuing a strong pipeline helping to mitigate an industry-leading amount of patent expirations.

We believe the innovation in the pipeline is strong enough to offset the patent losses, supporting our wide moat rating for the firm. Additionally, while Astra slightly increased its full-year 2015 guidance, we believe better-than-expected sales from gastrointestinal drug Nexium largely supported the improved outlook and we expect these sales to fall quickly in 2016 as more generics enter the market.

On the top line, recently launched drugs are partially offsetting generic competition, leading to an overall sales decline of 2%, but we expect this decline to accelerate into 2016 as generic competition intensifies. Similar to recent quarters, strong growth from cardiovascular drug Brilinta and diabetes drug Farxiga helped offset the impact of generic Nexium. However, in 2016, we expect launches of more generic versions of Nexium as well as the launch of generic Crestor, leading to a major headwind as the drugs represent close to one third of total sales.

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.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
AstraZeneca PLC7,876.00 GBX-0.05
Roche Holding AG295.80 CHF0.14

About Author

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

Audience Confirmation


By clicking 'accept' I acknowledge that this website uses cookies and other technologies to tailor my experience and understand how I and other visitors use our site. See 'Cookie Consent' for more detail.

  • Other Morningstar Websites
© Copyright 2020 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Cookies