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AstraZeneca scrapes through a tough 2016

Key trial readouts this year will be crucial to a change in sentiment for the pharma giant
February 2, 2017

The fact that shareholders didn’t respond too badly to final results from AstraZeneca (AZN) might indicate that they - like management - had low expectations for the year just gone.

IC TIP: Buy at 4200p

The loss of patent protection for Crestor, Astra’s best ever selling drug, was the main cause of an 8 per cent fall in product sales in the reported period, at constant currencies. A rise in revenue from drugs that have been spun out to other pharma groups sent core gross margins down to 79.3 per cent in the fourth quarter, a 310 basis point fall year on year.

Chief executive Pascal Soriot calls this pain the “ongoing transition of our company”. Analysts seem to agree: their main concern is the Mystic cancer trial that has recently come under intense scrutiny. Failure of this final phase, which is due to report results in mid-2017, would be a heavy blow to sentiment.

But the future of Astra is not merely hanging by this thread. Tagrisso and Farxiga - two drugs launched in the past few years to treat lung cancer and diabetes, respectively - are heading fast towards the $1bn revenue mark, and approval in China later this year should boost sales. There are also many more drugs in the pipeline, which will help Astra return to growth by the 2018 financial year.

ASTRAZENECA (AZN)

ORD PRICE:4,200pMARKET VALUE:£ 53.1bn
TOUCH:4199.5-4200.5p12-MONTH HIGH / LOW:5,505p3,680p
DIVIDEND YIELD:5%PE RATIO:19
NET ASSET VALUE:1,174ȼ*NET DEBT:64%

Year to 31 DecTurnover ($bn)Pre-tax profit ($bn)Earnings per share (ȼ)Dividend per share (p)
201228.07.6495179
201325.73.3204176
201426.11.298178
201524.73.1223189
201623.03.6277219
% change-7+16+24+16

Ex-div:16 Feb

Payment:20 Mar

*Includes intangible assets of $39.2bn, or 3102ȼ £1=$1.26