Uk – ftse 100
30 July 2009
Market Cap; 40.59bn
Team Contact Details
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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)
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.
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Analyst: Jeremy Batstone-Carr
Prices are as at close 29 July 2009
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