The following excerpts explain why Zacks senior pharmaceutical industry analyst Brian Marckx, CFA expresses a neutral viewpoint on AstraZeneca PLC (AZN), the pharma giant:
'AstraZeneca PLC is engaged in the research, development, manufacturing and marketing of ethical (prescription) pharmaceutical products. The company ranks among the top pharmaceutical companies in the world based on revenues and global sales force. It is a leader in cardiovascular, cancer and gastrointestinal drugs.
'In June 2007, the company completed the acquisition of biotechnology company MedImmune for $15.6 billion in cash. Earnings in 2007 are shaping up to come in about 7% better then 2006, but we note that 2006 comps were tough to beat. We disagree with the street consensus that the company faces significant challenges in the years to come. Growth will likely slow down in 2008 as the MedImmune acquisition is digested but we believe that both the pipeline and the cost-cutting ability of the company are underestimated.
'Management appears to have clearly defined goals in regards to building out its pipeline and getting more drugs to market. We believe the stock offers an attractive valuation, good long-term growth, and potential upside if the company can deliver on its expectations and the move into biologics pays off.
'The current P/E of 10.5x is below the large-cap pharmaceutical peer-group average of 15.5x. Given that growth should pick up in 2009 once MedImmune becomes accretive, we believe that the name does offer attractive upside. Although the stock currently trades near its 12-month low we don't expect a significant amount of movement in the near-term based on our moderate earnings growth forecast for fiscal 2007. Based on our projections we have a $45 per U.S. ADR price target on the shares, representing 10.9x our 2007 earnings forecast of $4.13. We currently rate shares of AstraZeneca a Hold.'
Read the full analyst report on AZN.
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