FDA approval for its latest type 2 diabetes product - the Bydureon Pen - is good news for AstraZeneca (AZN). But it's hardly surprising given AZN's buy-out of partner Bristol Myers Squibb from its shared diabetes alliance earlier this year. But the news has fuelled further speculation that the share price, up roughly 15 per cent since the New Year, is now overvalued.
Last year was not pretty for AstraZeneca shareholders. The stock floundered, never breaking through 3,500p. But the price has since soared to more than 4,000p and, after chief executive Pascal Soriot clarified the group's five-year targets in January, there is growing belief the the business could be recovering at last.
A forward PE ratio of 14.7 (according to brokerage Liberum's estimates) makes AZN's shares no more expensive than its closest sector peer GlaxoSmithKline. And seeing as both companies offer significant dividend yields, only the future products in the pipeline can really help to set them apart. By the end of 2015, analysts predict AZN's product pipeline will be four times bigger than 12 months ago. If true, forecast EPS growth of 15 per cent from 2017-20 looks achievable.
