Uk – ftse 100



UK Comment

30 July 2009
Headlines
AstraZeneca
Share Price;2803p

Market Cap; 40.59bn
Yield; 0.1%
Team Contact Details
Tel: 020 7149 + (ext number)
Guidance raised but is this as good as it gets?
Email: [email protected]
AstraZeneca has delivered a very strong set of Q2 2009 results, as expected. The Jeremy Batstone-Carr (6373)
initial share price reaction is very positive, in part a reflection of the fact that, as expected, the company has raised its Core EPS guidance to $5.70-$6.00 against Investment Strategy Pharmaceuticals & Healthcare prevailing consensus for $5.60, itself well ahead of the previous guidance range ($5.15-$5.45 per share). The shares have also benefited from aggressive short Nic Clarke (6126)
covering as a number of market participants had been expecting the share price to weaken after a strong run over Q2, in anticipation of the results duly delivered. A more sober assessment of these numbers suggests that the bears will still have their
Tony Shepard (6374)
day, however, the market can do little other than to recognise that, in the very near- term, these are pleasing figures. We see no reason to alter our long-held Reduce
recommendation and would use share price strength in the wake of these results to lock in recent gains with a view to switching into either GlaxoSmithkline (Hold) or
Tom Gidley-Kitchin (6795)
Shire Pharmaceuticals (Hold, results due 5th August), or our preferred Pan-European Boosted by another strong performance by key revenue driving products, a $220m disposal gain on Nordic OTC operations and continued focus on cost control, Sam Hart (6504)
AstraZeneca has reported a 9% increase in CER sales to $7,554m over Q2 (consensus $7,554m), although flat in reported terms. Highlights included a 33% increase in cholesterol buster Crestor to $1129m (forecast $1120m) and a useful contribution from Toprol XL given the ongoing absence of generic competition. Core gross margin remains robust at 82.7%. Although less impacted by “swine ‘flu” Tina Cook (6511)
Aerospace & Defence
orders, AstraZeneca has received an order for H1N1 preparation from the US government valued at $151m. Core operating profit increased by 32% in reported terms and by 37% CER to $3,606m. Core EPS increased by a similar 37% to $1.64, well ahead of our $1.45 estimate, boosted in part by the exclusion of c$430m legal provisions and supporting the increased guidance for the full year. Robert Corden (6219)
Near-term news flow is likely to be dominated by US approval for Onglyza (due 30th July pm), Phase 3 data on Brilinta due to be presented over 29th Aug-2nd Sept and Stephen Peters (6433)
Phase 3 data for Dapagliflozin due 2nd Oct. Despite these positive pipeline catalysts we remain concerned by prospects for the pipeline, particularly so in the context of the launch of generic Nexium and a likely patent legal challenge against Crestor, due Laura Hatt (6685)
Senior Research Administrator
John Law (6101)
Research Administrator
Estimates are likely to be raised in the wake of these results (analyst conference 13.00 BST), however, the scope for top line upgrades is, in our view very limited beyond 2009. We increasingly view this year as the peak year for Group sales with as much as a 30% fall over through to 2015. In the context of the stalling top line interest may start to centre on the balance sheet where AstraZeneca reports that strong cash inflows have helped reduce net debt by $3bn since 31st December 2008. The dividend was increased by 7% to $0.59 per share. Croesus distribution list, please email us Analyst: Jeremy Batstone-Carr
Prices are as at close 29 July 2009

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