Stock of the day 23/04/2015 – AstraZeneca PLC

The UK is getting in on earnings week on Friday, as Anglo-Swedish pharmaceutical monster AstraZeneca releases if Q1 2015 earnings release.

Astra saw pretty strong growth in the first half of last year, something that plateaued in the final 6 months after the Pfizer takeover bid fizzled out. It opened 2014 at £36.25 and closed the year at £45.56; however, much of this growth was found between mid-April and mid-May. Since the start of 2015 the stock has been mixed. Steady declines from the January onwards led to a low of £42.55; however, a flurry of good news and takeover rumours has recently pushed Astra higher, hitting an intraday high of £49.35 last Friday before reaching a 2015 closing high of £48.64 on Wednesday.


(Source: IT-Finance.com 23/04/2015)

Persistent talk of a bid for AstraZeneca from US giant Pfizer has been the latest catalyst for the stock’s upswing, just the latest bit of M&A fever that has struck the markets in the past few weeks. When AstraZeneca turned down a £70 billion takeover bid from Pfizer last year it caused a severe 13% decline in its price; it will be interesting to see if there is a case of déjà vu if any tangible attempt appears as the year continues.

In terms of the company’s pipeline, the recently approved Lynparza, an ovarian cancer drug, has also been showing signs of effectiveness in regards to prostate cancer, in yet another boost to AstraZeneca’s portfolio. The company has already pegged Lynparza for $2 billion a year without factoring in uses for prostate cancer; more positive results from these latest clinical trials will only increase this figure. On top of this is strong data from its latest experimental lung cancer pill, a potential $3 billion a year earner, alongside progress for its eye cancer drug selumetinib, which is well on its way to becoming the first treatment in the world for the rare uveal melanoma.

However, the increasing prevalence of generic drugs as patents expire is an ongoing concern for AstraZeneca, as are the current currency headwinds that are beginning to define this earnings season as they did the last.

Analysts at Swiss bank UBS are expecting an increase in earnings per share to $1.23, something that would have been 2% higher if it wasn’t for the stronger dollar, alongside a 4% decline in sales to $5.679 billion, 7% worse due to the greenback, and a 6% growth in operating profits. This leaves AstraZeneca with a consensus rating of ‘hold’ and an average target price of £49.45.