Astra's plan comes at too high a price

Some City analysts believe pharma giant AstraZeneca (AZN) has moved into the second phase of its strategic plan following an expectation-beating set of third-quarter figures. The numbers revealed a return to sales growth, following strong demand for the group’s cancer products, while management also reiterated full-year guidance for earnings per share (EPS) of $3.30 (£2.57) to $3.50. This fits into the narrative that Astra has long been feeding investors: that innovative new drugs will fuel future growth as lesser-earning medicines are phased out. But while some believe the third-quarter sales performance laid the foundation for a brighter future, a more detailed analysis of Astra’s recent financial performance suggests that investing in the group’s future still demands a significant leap of faith, and the shares’ valuation seems to take limited account of the risks.