It’s Time for AstraZeneca plc (ADR) (AZN) to Save Its Future

Page 1 of 2

You Won't Believe Where I Found Yields of Up to 16%The hits keep coming at AstraZeneca plc (ADR) (NYSE:AZN). The struggling big pharma player has seen its stock taken down more than 6% so far in 2013, and with earnings season in the rearview mirror — one that did little to boost this company’s lagging fortunes — AstraZeneca is in need of a shakeup.

The company’s pipeline needs help. AstraZeneca faces a potent patent cliff ahead in the near future, and without new products to compensate for the inevitable sales losses to come, this company will struggle to succeed. Is a well-timed acquisition just what AstraZeneca needs to stave off the losses to come?

Earnings trouble, past and future
Let’s review the company’s waning fortunes and why it’s in bad shape.

AstraZeneca’s full-year revenue fell 17% year-over-year in 2012, with operating profit and earnings per share both falling more than 30% in the same time frame. The only silver lining came in that fourth-quarter losses managed to top even more downbeat analyst projections; still, that’s little consolation for long-term investors concerned about the future.

The U.S. market has taken the biggest bite out of AstraZeneca. Domestic sales fell 23%, which the company largely blamed on Seroquel, the company’s blockbuster schizophrenia drug, losing patent protection last March. Emerging markets did manage to grow by a meager 6%, but that won’t be enough to power AstraZeneca’s future.

With AstraZeneca CEO Pascal Soriot projecting more losses in 2013, the mess isn’t going away any time soon. Seroquel’s losses have certainly hurt, but AstraZeneca’s patent-related woes don’t stop there. Nexium and Crestor, both top sellers for the company, face patent expirations of their own in 2014 and 2016, respectively. AstraZeneca’s already given us a preview of what could happen with Crestor: Generic competition in Canada knocked the drug’s sales down 84% in 2012.

A barren pipeline can’t feed the future
Unfortunately for long-term investors, AstraZeneca’s pipeline isn’t anything impressive. Disappointing clinical trials put the kibosh on AstraZeneca’s phase 3 rheumatoid arthritis medication fostamatinib, after studies last year showed the product failed to match AbbVie Inc (NYSE:ABBV)‘s RA market-leading therapy — blockbuster household-name Humira — in efficacy. AstraZeneca is still on pace to file for fostamatinib’s regulatory approval later this year, but don’t expect the drug to make much of a dent in the market. In any case, fostammatinib isn’t going to even approach Humira’s sales, which hit $9.3 billion in 2012 and are projected to go higher in 2013.

Forxiga, the company’s diabetes medication, did receive approval late last year in the EU, but with the FDA rejecting the drug, peak sales expectations are muted. AstraZeneca’s pipeline is in desperate need of a blockbuster — or at least something that can deliver a steady stream of revenue. Credit Suisse noted in a report that AstraZeneca would need to add $6 billion in annual sales just to make 2% sales growth by 2016; that’s not going to happen without a major move.

Soriot did mention late last year after taking the helm at AstraZeneca that, “We need to bolster our pipeline and there is no question we will rely on business development.” While Soriot has sounded receptive to the possibility of takeovers, he sounded less optimistic on any massive, industry-shaking type of takeover earlier this year, saying, “I don’t think we need a large-scale acquisition to succeed.”

A warning from rating agency Standard & Poor’s further hints that large-scale acquisitions might not be coming. The agency mentioned that it could cut AstraZeneca’s AA credit rating with a major purchase, citing the pressures of a big deal with patent expirations on the way.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!