AstraZeneca Reiterates Guidance - Analyst Blog

AstraZeneca ( AZN ) recently reaffirmed its previously-issued near-term core earnings per share ("EPS") and long-term revenue, margin and cash deployment guidance.

AstraZeneca maintained that its core earnings are expected to be in the lower half of the guidance range $7.20 - $7.40 per share. Earlier on December 20, 2011, the company had suffered two consecutive pipeline setbacks.

The development of an ovarian cancer candidate, olaparib, was discontinued and a phase III study of TC-5215 for major depressive disorder ("MDD") did not meet its primary endpoint. AstraZeneca announced that these developments would lead to pre-tax impairment charges totaling $381.5 million, which would reduce fourth quarter earnings by 21 cents per share.

At that time, AstraZeneca reiterated its earnings guidance range to be $7.20 - $7.40 per share, but announced that it expects the actual figure to lie in the bottom half of the range.

The company also reaffirmed its revenue, margin and cash deployment guidance for the 2010 - 2014 period. On January 27, 2011, AstraZeneca had provided an outlook for 2010 - 2014 in addition to announcing fourth quarter and full year 2010 results.

AstraZeneca had announced that it anticipates revenues to lie in the range of $28 billion - $34 billion each year in the 2010-2014 time period, with 2014 revenues likely to come somewhere in the middle of the range. During the aforementioned time frame, AstraZeneca expects contribution from recently launched products as well as pipeline products, which could be marketed over time, in a range of $3 billion - $5 billion.

Further, the company expects its pre-research and development ("R&D") operating margin to amount to 48% - 54% of total revenue per annum. The company expects to reinvest about 40% - 50% of its pre-R&D post tax cash flows in internal and external R&D and capital investments to drive growth.

Our Recommendation

We currently have a Neutral recommendation on AstraZeneca, which carries a Zacks #3 Rank (short-term hold rating). Even though we are encouraged by the strong cardiovascular franchise at AstraZeneca and the company's focus on the high-potential emerging markets, we remain concerned about the generic competition faced by its key products.

The company is looking to lessen the impact of genericization by reducing its cost structure. Meanwhile, the weak late-stage pipeline at AstraZeneca also bothers us.

ASTRAZENECA PLC ( AZN ): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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