Astra Posts Solid 4Q but Lowers Long-Term Outlook

We expect generic competition will weigh on AstraZeneca for many years as it faces one of the longest and most severe patent cliffs

Damien Conover, CFA 27 January, 2011 | 4:59PM
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AstraZeneca (AZN) reported fourth-quarter results that slightly exceeded our expectations. However, we don't expect any changes to our 3,298 pence-per share fair value estimate based on the minor outperformance. As we had expected, Astra lowered its long-term revenue outlook for 2014, which now stands at the middle of the range of $28 billion-$34 billion, down from the upper end. We believe the slow uptake of diabetes drug Onglyza along with the U.S. delay on cardiovascular drug Brilinta caused management to lower its guidance, which now closer matches our expectations.

In the quarter, total sales fell 3% operationally versus the prior-year period, slightly better than we had projected. Strong sales from cholesterol-lowering drug Crestor accounted for the majority of the outperformance. While we had already projected robust growth for Crestor of 13% annually over the next three years, we will probably increase our projections based on the drug's recent strength, which we attribute to recently added indications and perceived best-in-class efficacy. The strong Crestor sales help offset generic competition to respiratory drug Pulmicort and oncology drugs Arimidex and Casodex. We expect generic competition will weigh on the company for many years as Astra faces one of the longest and most severe patent cliffs.

We believe Astra has several important new drugs that should help to offset the patent losses. In particular, Brilinta and diabetes drug dapagliflozin are poised to become the next generation of blockbusters.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
AstraZeneca PLC8,641.00 GBX-2.31Rating

About Author

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

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