AstraZeneca PLC (AZN) 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.
Key drugs such as Crestor, Seroquel and Symbicort will continue to be the driving force of growth until the company can monetize its pipeline. Generic competition will eat into revenue growth, but productivity initiatives should pay off in the form of healthier margins and mid-single digit earnings growth for the next few years.
We believe the company will have a tough time growing revenue at a rate better than the low single-digits in 2008 due significant competition from generics. However, management's productivity and synergy initiatives should benefit operating margins and earnings in the next few years, which should help grow EPS faster than revenues. Management appears to have clearly defined goals in regards to building out its pipeline and getting more drugs to market.
On the fourth quarter call, management said they expect to file up to three new license applications per year and bring two new drugs to market per year through 2010. The company delivered on the first filing this year with the NDA for NuMax in January.
We think the shares trade a relatively attractive level given the potential that management can deliver on its goals and significantly add to top-line growth through pipeline successes. We believe the stock offers fair valuation and rate the shares a Hold with a $42 price target, representing 9.8x our 2008 EPS forecast of $4.27. This is well below the large-cap pharmaceutical peer-group average of 15.5x.
Read the full analyst report on AZN.
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