AstraZeneca plc Ordinary US$0.25 (AZN)

Company overview

AstraZeneca Plc is a global pharmaceutical and biologics company headquartered in London. It is the world's seventh largest pharmaceutical company measured by revenues and has operations in over 100 countries. 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. The group's primary listing is on the London Stock Exchange and it is a constituent of the FTSE 100 Index.  It also has secondary listings on the New York Stock Exchange and the OMX Exchange.

HL Comment (2 February 2012)

Anglo-Swedish pharmaceutical company AstraZeneca warned of growing pressure on its revenues and unveiled plans to cut 7,300 jobs alongside full year results published earlier today. The drug maker posted full-year revenues down 2% to $33.3 billion with nearly $2 billion in sales lost to generic competition and $1 billion because of government price intervention. Pre-tax profits for the full year rose 12.7% to $12.8 billion. In announcing a new set of restructuring initiatives, the group said the total number of positions expected to be impacted by this phase is estimated to be 7,300 or 12% of its total workforce. The latest restructuring was needed because of the weak economy and the impact of competition from generic drugs. AstraZeneca faces loss of patent on several best-selling drugs over the next few years, with Seroquel, its second-biggest drug, coming off-patent this year. Moving forward, the company said it is anticipating a 10% drop in revenues and lower profits as the business reshapes to compete in a rapidly changing healthcare environment.

Negative Points:

• Astra warned that the coming years would be "challenging for the industry and for the company". The pharmaceuticals industry has come under pressure because its major players have struggled to invent new blockbuster drugs as patents on existing best sellers expire, leaving them open to cheap competition.
• The company is also facing the loss of patents on some of its products such as anti-psychotic treatment Seroquel, and new products are failing to compensate.
• US healthcare reforms and initiatives across Europe currently provide concern.
• Currency movements can provide headwinds.

Positive Points:

• The UK Government has introduced lower taxes on patents in a bid to try to encourage companies to carry out more research in the UK.
• The latest job cuts are forecast to deliver $1.6 billion in annual benefits by the end of 2014, and are part of an ongoing efficiency drive, added management. In its first round of restructuring, AstraZeneca cut 12,600 positions between 2007 and 2009, followed by a second programme in 2010, which the firm said would lead to the loss of 9,000 jobs by 2012.
• AstraZeneca said it was extending its share buy-back programme with plans to return as additional $4.5 billion to shareholders in 2012.
• The board is recommending an increase in the full-year dividend by 10% to $2.80 a share.

Consensus:

On balance, market consensus indicates a weak hold.

All yield figures are variable and not guaranteed.

Fundamental Data

Values are quoted in the stock's local currency: US dollar.

Year Ending	Revenue (m)	Profit Before Tax (m)	EPS ($)	P/E Ratio	PEG	EPS Growth (%)	Total Dividend	Dividend Yield
31-12-2011	33,591.00	12,367.00	7.33	6.50	0.80	8.00	2.80	5.90
31-12-2010	33,269.00	10,977.00	5.60	6.90	1.10	6.00	2.55	5.50
31-12-2009	32,804.00	10,807.00	5.19	7.30	0.30	24.00	2.30	5.00
31-12-2008	31,601.00	8,681.00	4.20	8.70	0.50	16.00	2.05	4.60
31-12-2007	29,559.00	7,983.00	3.74	7.80	0.60	14.00	1.87	5.50