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: firstname.surname@charles-
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

Please refer to important disclaimers at
end of document
Charles Stanley & Co. Limited does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity, independence and impartiality of this report. Investors should consider this report as only a single factor in making their investment decision. For important disclosures, refer to the back of this document or go to http://www.charles-stanley.co.uk/research/. This document is a marketing communication. This research has not been prepared in accordance with regulatory requirements designed to promote the independence of investment research. FTSE 350 Highest Forecast Yield with Cover > 2x
Yield and cover based on consensus dividend and earnings estimate for first forecast year FTSE 350 Lowest Forecast PE
PE based on consensus earnings estimate for first forecast year FTSE 350 Lowest Forecast Price to Book Value
Price to book value based on consensus book value estimate for first forecast year FTSE 350 Lowest Price to Cash Flow
Cash flow defined as net income plus depreciation, amortisation, provisions and net working capital Price to cash flow based on consensus cash flow estimate for first forecast year FTSE 350 Lowest PEG Ratio
PEG calculted by dividing PE ratio based on first forecast year earnings estimate by growth rate of earnings from between year 1 and year 3 All earnings taken after goodwill and exceptionals FTSE 350 Best Stock Performance Over Last Month
FTSE 350 Worst Stock Performance Over Last Month
Global Index Performance

General regulatory disclosures
This document is a marketing communication.
This research has not been prepared in accordance with regulatory requirements designed to promote the independence of investment research.
Recommendations are given in good faith but without legal responsibility and are subject to change without notice. The information does not constitute
advice or a personal recommendation or take into account the particular investment objectives, financial situations or needs of individual clients. You are
recommended to seek advice concerning suitability from your investment advisor. Investors should be aware that past performance is not necessarily a
guide to the future and that the price of shares, and the income derived from them, may fall as well as rise and the amount realised may be less than the
original sum invested.
"Gearing" means a strategy, with a view to enhancing the return for, or the value of, an investment without increasing the amount invested by the holders of
the investment, involving one or more of the following: (i) borrowing money; (ii) investing in one or more instruments, such as (but not limited to) warrants or
derivatives, for which a relatively small movement in the value or price of the underlying rights or assets to which the instrument relates, whether favourable
or adverse, results in a larger movement in the value or price of the instrument; and (iii) structuring the rights of holders of an investment so that a relatively
small movement in the price or value of the underlying rights or assets, whether favourable or adverse, results in a larger movement in the price or value of
the investment. The strategy that the issuer of geared investments uses or proposes to use may result in (a) movements in the price of the investments
being more volatile than the movements in the price of the underlying investments; (b) the investment being subject to sudden and large falls in value; and
(c) you getting back nothing at all if there is a sufficiently large fall in value in the investment.
Other than disclosures relating to Charles Stanley & Co. Limited this research is based on current public information that we consider reliable, but we do not
represent it is accurate or complete and it should not be relied on as such.
Charles Stanley & Co. Limited conducts a full service investment management, investment banking and brokerage business. We have investment banking
relationships with a number of the companies covered by our Research division. We may seek investment banking business from the covered businesses
referred to in this research.
Charles Stanley & Co. Limited and its connected companies, their directors, members, employees and members of their families may have positions in the
securities or derivatives (including options and warrants) thereof of covered companies referred to in this research.
As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity, independence and impartiality of this
report. Investors should consider this report as only a single factor in making their investment decision.
Our policy on managing actual or potential conflicts of interest can be found at:

Equity, bond and technical analysis use different research recommendations definitions. These are set out on the above website, as is a summary of the
bases of valuation and methodologies used by us to evaluate or set price targets for the subjects of our research. Details of the proportions of all research
recommendations published during the preceding calendar quarter can be found at:
Our salespeople, traders and other professionals may provide oral or written market commentary or trading strategies to our clients and our proprietary
trading desks that reflect opinions that are contrary to the opinions expressed in this research. Our Asset Management area, our proprietary trading desks
and investment advisers may make investment decisions that are inconsistent with the recommendations or views expressed in this research.
This research is not an offer to sell or the solicitation of an offer to buy or sell any security in any jurisdiction where such an offer or solicitation would be
illegal.
Our research is distributed primarily electronically and, in some cases, in printed form.
2009 All rights reserved. No part of this report may be reproduced or distributed in any manner without the written permission of Charles Stanley & Co.
Limited.
Charles Stanley & Co. Limited specifically prohibits the re-distribution of this report, via the Internet or otherwise, and accepts no liability whatsoever for the
actions of third parties in this respect.

This document is issued by Charles Stanley & Co. Limited
Member of the London Stock Exchange Authorised and regulated by the Financial Services Authority
Registered in England No. 01903304. Registered office 25 Luke Street, London EC2A 4AR
T 020 7739 8200
Offices: Bath, Bedford, Birmingham, Bournemouth, Brighton & Hove, Bristol, Cambridge, Dorchester, Eastbourne, Edinburgh, Exeter, Guildford, Ipswich,
Isle of Wight, Leeds, Liverpool, Manchester, Milton Keynes, Newbury, Norwich, Nottingham, Oxford, Plymouth, Reading, Southampton, Southend-on-Sea,
Truro, Tunbridge Wells, Watford & Wimborne.

Source: http://www.angelsgroup.org.uk/efiles/Investor/Charles%20Stanley%20-%20AstraZeneca%20(Reduce)%20Thursday%2030th%20July%202009.pdf