Shareholders in pharma giant AstraZeneca (AZN) ran for cover after the group announced that its core EPS for the 2016 financial year is expected to fall by a mid-single digit percentage. Two major deals from last year will hit earnings, while revenue is also set to fall by the same proportion. If this is 'going it alone', after stepping away from the Pfizer (US: PFE) deal, investors would be forgiven their doubts. But chief executive Pascal Soriot remains positive about the group's ability to meet 2017 target sales figures, and with heavy investment in research and development this year, the group's longer-term prospects may provide some comfort.
Respiratory products remain the backbone of the company, accumulating nearly $5bn (£3.4bn) of sales in the reported period, but it is oncology that has seen the heaviest investment, attracting nearly 40 per cent of overall R&D costs. The group’s new lung cancer drug, Tagrisso, which has recently been approved by regulators in the US and Europe, has become one of the fastest medicine-development programmes in history, with only two years and eight months between the start of clinical trials and drug approval. The future looks bright for the oncology division, with six new medicines due to be launched by 2020 and a broad range currently in later-stage clinical trials.
But looking at the overall picture, for all its products in the development process, AstraZeneca hasn’t progressed all that many to market. The clinical pipeline is close to capacity at 125 projects, many of which are still in the early stages of development.
Clearly 2016 will be a tricky year for AstraZeneca. Current exchange rates are unfavourable for the group and the anticipated decline in revenue is based largely on the weakness of trading currencies against the US dollar. It also anticipates a change in May when one of the group’s biggest drugs will lose its exclusivity in the US.
Prior to these numbers analysts at Deutsche Bank were forecasting 2016 EPS of $4.28, falling to $4.21 in 2017.
| ASTRAZENECA (AZN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 4,217p | MARKET VALUE: | £53.3bn | |
| TOUCH: | 4,216.5-4,217p | 12-MONTH HIGH / LOW: | 4,906p | 3,746p |
| DIVIDEND YIELD: | 4.5% | PE RATIO: | 28 | |
| NET ASSET VALUE: | 1,462ȼ* | NET DEBT: | 48% | |
| Year to 31 Dec | Turnover ($bn) | Pre-tax profit ($bn) | Earnings per share (ȼ) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 33.6 | 12.4 | 733 | 176 |
| 2012 | 28.0 | 7.6 | 495 | 179 |
| 2013 | 25.7 | 3.3 | 204 | 176 |
| 2014 | 26.1 | 1.2 | 98 | 178 |
| 2015 | 24.7 | 3.1 | 223 | 189 |
| % change | -5 | +156 | +128 | +6 |
Ex-div:18 Feb Payment:21 Mar *Includes intangible assets of $34.5bn, or 2,730ȼ a share £1 = $1.46 | ||||
