AstraZeneca plc Ordinary US$0.25 (AZN)

Company overview

The Anglo-Swedish group's primary activity is the research, development, production and marketing of medicines. Six different therapy areas are focused on: Cardiovascular, Oncology, Respiratory, Gastrointestinal, Neuroscience, and Inflammation and Infection. The Group operates from 30 manufacturing sites located in 20 different countries across the globe, employing over 62,000 people worldwide and distributing its products in over 100 countries.

HL Comment (29 July 2010)

The group’s second quarter/half year results (29July2010) materialised at the high end of analysts’ expectations. Pre-tax profit during the quarter rose by 10pc on a constant currency basis to $2.91 billion, whilst earnings per share came in at 179 US cents. The group’s core brands - Crestor, Seroquel and Symbicort – continued to enjoy strong performances, whilst emerging market sales again saw positive momentum (+16pc) – this compared to an increase of 1pc in Western Europe. In addition to the figures, management was also able to announce the endorsement by the US advisory drug panel for its potential heart drug Brilinta – a series of group drugs are set to lose their patents, with rival company generic versions set to hit sales.

Negative Points

• The threat of generic drug competition continues to hang high over the company. 2010 revenues are expected to be impacted by the loss of patents for certain drugs - exclusivity on acid reflux drug Nexium and Seroquel for schizophrenia are pending.
• The second quarter period saw US sales falling by 4pc on a constant currency basis.
• The development of new blockbuster drugs is still proving relatively slow.
• US healthcare reforms provide some continuing uncertainty, although the company has already been making provisions.

Positive Points

• Q2 earnings beat forecasts, whilst management increased its guidance for the full year – management raised its prediction for 2010 core earnings per share, which exclude certain restructuring costs and charges, to between 635 US cents and 665 US cents from a previous forecast of around 632 cents per share.
• A share buy-back scheme was introduced at the FY 2009 results. To date, the company has completed net share repurchases of $516m towards its initial target of $1 billion.
• The group’s top selling Crestor drug (for cholesterol) recently received a favourable judgement from the US Federal Drug Authority regarding its patent.
• The development pipeline is being worked on – over 146 projects, including 97 projects in the clinical phase of development.
• The dividend policy remains supportive.

Consensus

On balance, market consensus opinion currently denotes a hold.

All yield figures are variable and not guaranteed.

Fundamental Data

Year Ending	Revenue (m)	Profit Before Tax (m)	EPS ($)	P/E Ratio	PEG	EPS Growth (%)	Total Dividend	Dividend Yield
31-12-2009	32,804.00	10,807.00	5.19	7.10	0.30	24.00	2.30	5.10
31-12-2008	31,601.00	8,681.00	4.20	8.50	0.50	16.00	2.05	4.70
31-12-2007	29,559.00	7,983.00	3.74	7.60	0.50	14.00	1.87	5.60
31-12-2006	26,475.00	8,543.00	3.86	11.00	0.30	33.00	1.72	4.10
31-12-2005	23,950.00	6,667.00	2.91	15.00	0.30	45.00	1.27	2.90