AstraZeneca Positioned to Offset Patent Losses

Updated Equity Research: Growth in emerging markets and cost cutting efforts should help mitigate Astra's patent cliff

Damien Conover, CFA 4 March, 2011 | 11:20AM
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Fair Value Estimate: 3,305p | Uncertainty Rating: Medium | Economic Moat: Wide

Thesis (Last updated on 15/02/2011)
AstraZeneca's (AZN) leading presence in the pharma and biotech industry is built on patent-protected drugs and a developing pipeline that all add up to a wide moat. The firm's dynamic operations and an aggressive acquisition strategy create growth opportunities to offset patent losses, including the near-term expirations on respiratory drug Pulmicort and oncology drug Arimidex.

The company boasts a healthy product portfolio led by four key drugs. These growth drivers include gastrointestinal drug Nexium, antipsychotic treatment Seroquel, cholesterol reducer Crestor, and respiratory agent Symbicort. Collectively, these drugs posted more than $18 billion in sales for 2010, representing over half of the company's sales. Ongoing clinical studies are advancing the indications for these products and tapping into new patient pools for continued growth. Besides Seroquel's 2012 patent loss, the corresponding key patent expirations for the other three drugs range from 2014 to 2016, which provides ample time for pipeline products to kick in. Modified release versions of these products may also partially extend patent protection. However, given the high level of sales for these key drugs, we don't think the company's pipeline will offset the sales loss during the next decade.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
AstraZeneca PLC8,845.00 GBX2.04Rating

About Author

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

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