AstraZeneca (AZN)

• Article
• Discussion
• Edit
• History
• Bookmark

See all Bulls Reasons Bulls: Reasons To Buy MedImmune acquistion will provide long term pipeline 0% agree MedImmune acquistion will provide long term pipeline AstraZeneca's $15.6B acquisition of MedImmune will prove to be stragically wise, providing a much needed boost to the company's pipeline in the long term. View or Edit Reason 0 votes 0% agree AstraZeneca has a highly profitable portfolio of young medicines 0% agree AstraZeneca has a highly profitable portfolio of young medicines AstraZeneca has a highly profitable portfolio of core medicines that is young and well diversified. These medicines will continue to produce strong cash flow and earnings in the short to mid-term. View or Edit Reason 0 votes 0% agree See all Bears Reasons Bears: Reasons To Sell "Despite its profitable short-term prospects, AstraZeneca has a dim future" 0% agree "Despite its profitable short-term prospects, AstraZeneca has a dim future" Despite its profitable short-term prospects, AstraZeneca has a dim future. It's considerable reseach and development budget has failed to produce any groundbreaking drugs. View or Edit Reason 0 votes 0% agree Despite its profitable short-term prospects, AstraZeneca has a dim future 0% agree Despite its profitable short-term prospects, AstraZeneca has a dim future Despite its profitable short-term prospects, AstraZeneca has a dim future. It's considerable reseach and development budget has failed to produce any groundbreaking drugs. View or Edit Reason 0 votes 0% agree Is AstraZeneca's Pipeline Running Dry? 0% agree Is AstraZeneca's Pipeline Running Dry? This time last year, AstraZeneca's future looked pretty bright. Nexium was selling like hotcakes, its other drugs were doing well on their own, and there were several promising drugs in the pipeline. Today, Nexium is still the number two drug in the world by sales, and some... read more View or Edit Reason 0 votes 0% agree Send the authors a comment or suggestion Be the first to make a suggestion See All Suggestions

Top Contributors Vincent McPhillip Sean Hinton Dan Pan Related Articles Sanofi-Aventis SA (SNY) Bristol-Myers Squibb Company (BMY) Cardiac Disease Pharmaceuticals - Political pressure Clinical trials

AstraZeneca is one of the world's largest pharmaceutical companies, with FY2006 sales of $26.5 billion and $4.4 billion in profits. AstraZeneca's wide-ranging portfolio of products includes some of the world's most successful drugs. Among other blockbusters, AstraZeneca produces cholesterol fighter Crestor and the ubiquitous "purple pill" Nexium, one of the best-selling drugs in history.

Analysts credit AstraZeneca with having one of the most diversified drug portfolios in the pharmaceutical industry. AstraZeneca's blockbuster drug Nexium is the industry leader in treating gastrointestinal disorders like heartburn. The company also has a significant presence in cardiovascular therapy with Crestor, neurology with Seroquel, and respiratory treatments with Pulmicort and Symbicort. In all, AstraZeneca has eleven blockbuster drugs (with $1 billion or more in annual sales) in five different therapeutic categories. The strong performance of these drugs has propelled earnings growth in recent years.

Despite sunny short term prospects, AstraZeneca will face serious challenges in the future. Despite substantial R&D spending, the company's development pipeline has failed to produce any extremely promising candidates for future blockbuster drugs. In response to the coming drug drought, AstraZeneca recently acquired MedImmune for $15.6B. Although the acquisition may help to revive AstraZeneca's lackluster pipeline, many investors caution that AstraZeneca paid far too high a price for the company.

[edit] Corporate Overview

Based in London, AstraZeneca was formed in 1999 when Astra AB of Sweden merged with Zeneca Group PLC of the UK. The merger produced one of the world's largest pharmaceutical companies, employing 66,000 people in over 100 countries worldwide. In fiscal year 2006, AstraZeneca reported almost $26.5 billion in sales and $4.5 billion in net profit. AstraZeneca's impressive portfolio of drugs includes some of the world's most successful blockbusters. In addition to the ubiquitous "purple pill" heartburn drug Nexium and cholesterol fighter Crestor, AstraZeneca had 11 blockbuster drugs in 2006. All in all, these products generated 55% of the company's revenue in 2006 and an even larger percentage of its profits.

[edit] Blockbusters and Major Therapeutic Areas

The company focuses its pharmaceutical efforts on six basic therapeutic areas: gastrointestinal, cardiovascular, oncology, respiratory and inflammation, neuroscience, and infection.

Gastrointestinal - Prilosec and Nexium AstraZeneca is the market leader in treating gastrointestinal disorders like heartburn and acid reflux. In this therapeutic area, AstraZeneca has produced two of its most successful blockbusters: Prilosec and Nexium. Prilosec was the first in AstraZeneca's line of proton pump inhibitors, which treat acid reflux. Prilosec lost patent protection in 2002 but has remained resilient among strong generic competition, bringing in $1.4 billion in 2006. In response to Prilosec's loss of patent protection, AstraZeneca enhanced and re-branded the drug under the name Nexium. A strong marketing campaign and additional therapeutic benefits has produced strong results for "the new purple pill." Nexium raked in $5.1 billion in FY2006 and is AstraZeneca's top-selling product.

Cardiovascular - Crestor, Seloken/Toprol-XL & Atacand Cardiovascular disease is the leading cause of death in the world, accounting for over 30% of all human deaths every year. Hypertension, or high blood pressure, is the most common of all cardiovascular diseases, affecting 25% of the world's population; additionally, hypertension is often a precursor of more severe cardiovascular conditions. AstraZeneca has a strong presence in cardiovascular-related pharmaceuticals. Crestor, AstraZeneca's most successful CV drug with over $2 billion in sales, treats high cholesterol. AstraZeneca also has two blockbusters targeted at hypertension: Seloken/Toprol-XL recorded sales of $1.8 billion in 2006, while Atacand, a first-line treatment of hypertension had sales of $1.1 billion.

Neuroscience - Seroquel AstraZeneca's most successful drug for the treatment of neurological disorders is Seroquel. Seroquel is an anti-psychotic drug which can be used to treat several mental imbalances. Seroquel is used to treat schizophrenia in 87 markets globally and bipolar mania in 73 markets. In mid 2008, AstraZeneca won a U.S. patent battle against generics manufacturers, securing it's exclusivity to Seroquel until at least 2011.^[1]

Cancer - Arimidex, Casodex & Zoladex AstraZeneca is also a big player in cancer-related pahrmaceuticals. Cancer is now the second-leading cause of death in the US and Europe after cardiovascular disease. Over 10 million people are diagnosed with cancer every year. AstraZeneca has a strong portfolio of three blockbuster oncology drugs. Arimidex, which had sales growth of 29% last year and $1.5 billion in revenues, is one of the world's most successful breast cancer drugs. Casodex, another blockbuster, treats prostate cancer, which is the most common cancer among American men. Casodex had sales of $1.2 billion in 2006. AstraZeneca's third blockbuster cancer drug Zoladex is approved for use against both breast and prostate cancer and racked up just under $1 billion in sales in 2006.

Respiratory - Symbicort & Pulmicort AstraZeneca also has a notable offerings in the treatment of asthma and other respiratory disorders. The company markets two drugs targeted at asthma. The first, Symbicort, achieved sales of $1.3 billion in 2006. The second, Pulmicort, had sales of $1.2 billion in 2006, up 22% from the year earlier.

[edit] Business Growth

AstraZeneca reported a 29 percent growth in net profit to $1.73 billion from $1.34 billion in the third quarter 2008, compared to a year ago. Revenue rose 9 percent to $7.78 billion over the quarter, from $7.15 billion the year before. Sales in the US remained flat due to a $141 million decline in sales of Toprol-XL despite 5 percent growth in the rest of the U.S. business. Growth abroad was 6%, however (2% in established markets and 18% in emerging markets).

Cholesterol drug Crestor led the gain with 28% growth in sales to $922 million. Symbicort, an asthma drug, also gained 25% in revenue to $501 million. Seroquel, a schizophrenia drug, gained 4% to $1.13 billion while Nexium, a heartburn drug, lost 2% to $1.32 billion.

On November 10, 2008, AstraZeneca announced the results of a study that showed that for people with low-to-normal cholesterol levels but high sensitivity to cholesterol reactive proteins, taking Crestor resulted in a 54% decrease in the risk of heart attack. ^[2]

[edit] Research and Development

Researching and developing new drugs is the single most important consideration when identifying the prospects of any pharmaceutical company. The process is lengthy and extremely costly. During development phases, researchers and scientists must screen hundreds of thousands of compounds. Out of these hundreds of thousands of compounds only one may be effective for treatment. This process represents the pharmaceutical equivalent of finding a needle in a haystack. The hunt for the next blockbuster drug may take in excess of 10 years and can cost as much as $800 million dollars. A successful drug pipeline is critical for pharmaceutical companies because former blockbusters losing patent protection must be constantly replaced by new viable drugs.

[edit] The Pipeline

AstraZeneca's core of highly successful drugs represents one of the youngest and most diversified portfolio in the pharmaceutical industry. Despite this, the firm faces many challenges in the mid to long term: AstraZeneca's prospects after the year 2010 are decidedly dim. Despite a 16% increase in research and development spending to over $3.9B, AstraZeneca has failed to produce any truly groundbreaking drugs to complement its robust portfolio. This problem is compounded by several pipeline setbacks afflicting the company: three of AstraZeneca's most promising drugs were recently stopped in phases II and III testing due to health concerns. When a drug enters phase II, it is determined safe enough for experimental usage amoung a few hundred patients. Phase III testing involves calculating the risk/reward ratio of a potential drug. Prime among these was the blood thinner Exanta which was expected to bolster the company's CV therapeutic division.

[edit] MedImmune Acquisition

One effective way for pharmaceutical companies to expand or plug wholes in their drug portfolios and pipelines is through major acquisitions. In response to dimming increasingly prospects, AstraZeneca recently announced the acquisition of MedImmune for $15.6B. The most promising aspect of MedImmune's portfolio is its Synagis franchise which is used to protect pre-mature and other high-risk babies during RSV season. Sentiment over the deal has been mixed. While some believe that the acquisition will provide a bridge over troubled waters, others caution that AstraZeneca may have greatly overpaid to snap up the company.

[edit] Trends & Forces

[edit] Aging Populations

One macro trend that is sure to benefit the pharmaceutical industry on a mid to long term horizon is the world's aging population. Increased life expectancy coupled with decreased fertility in developed nations has produced a population that is, as a whole, older. In the United States, Western Europe and Japan median the median age has been on the rise for decades now and this trend is likely to accelerate with the upcoming wave of aging baby boomers. According to the United Nations, the population of people aged over 60 in the world is expected to rise dramatically from 606 million in 2000 to nearly 2 billion in the year 2050. In developed nations, the United Nations predict that people aged over 60 will compose almost 35% of the population by 2050 opposed to under 20% in the year 2000. Additionally, AstraZeneca will benefit from trends in emerging markets such as China's aging population. A rapidly expanding older population represents a key growth opportunity for AstraZeneca because this demographic represents the company's core market.

[edit] Emerging Markets

Emerging markets across the globe present another strong growth opportunity for AstraZeneca. As populations in emerging markets such as BRIC (Brazil, Russia, India and China) grow wealthier, they are gaining access to ever more sophisticated health services. As consumers from Russia to China begin to seek treatment from everything from heartburn to high cholesterol, hundreds of millions of these potential customers will turn to AstraZeneca's pharmaceuticals. The sheer size of these population make the emerging markets an incredible opportunity for growth for pharmaceutical companies like AstraZeneca.

[edit] Generic Drugs & Patent Protection

For a detailed discussion of brand name vs generic medication, see also Brand name vs Generic medications.

Due to Food and Drug Administration (FDA) regulations, pharmaceutical patents last 17 years in the United States, during which a pharmaceutical company has an exclusive right to manufacture a particular drug. After the patent expires, generic versions of the product can be produced and sold by competitors. Generic medication is cheaper than brand medication, undercutting the pricing power of the original pharmaceutical producer. It is estimated that the loss of patent protection for brand named drugs may reduce sales by up to 90%. Because of the stark decrease in pricing and general revenue generation that occurs with the lost of patent protection, AstraZeneca's business model is highly sensitive to patent protection and the enforcement of intellectual property rights. AstraZeneca has been surprisingly resilient in response to the loss of patent protection in the past. The best example of this came with Prilosec's loss of patent protection in 2002. AstraZeneca responded by rebranding the drug as Nexium, which went on to become the company's best selling drug.

Eight patents on drugs that represent 60 percent of the company's current sales are due to expire in the next eight years. The company also has eight products near the end of its product pipeline and launch. However, it is not clear whether all of these drugs will receive regulatory approval or whether they can replace sales lost to generics.

One of AstraZeneca's largest new products is saxagliptin, a diabetes drug co-developed with Bristol-Myers Squibb. However, even before its launch in 2009, competitor Novartis has developed a drug called Galvus. The two drugs share significantly similarities in chemical structure and pharmaceutical action, so it is unclear how they will fare after launch.

[edit] Unfavorable Legislative Environments

AstraZeneca also faces serious political pressures to increase accessibility to drugs in its two major markets: Europe and the United States. In these two markets, politicians have been pushing aggressively for AstraZeneca to lower drug costs or expand generic licensing. In 2006, European governments such as France and Germany took particularly drastic price reduction measures that adversely affected earnings in these markets. In the United States, legislators have also sought price reductions by giving federal programs such as Medicare and Medicaid increased latitude in its negotiations with pharmaceutical companies.

[edit] Outsourcing

Pharmaceutical companies are seeking to cut manufacturing costs by outsourcing drug production overseas. U.S. drug companies already outsource 33% of the $45 billion in total R&D spending.

AstraZeneca has expressed an intent to outsource all of its manufacturing operations within ten years, becoming a purely research and development company. Most of the job cuts announced so far have been in the manufacturing divisions.

[edit] Comparison to Competitors

The various aspects of patent protection and the extremely high costs of researching and developing drugs marks the pharmaceutical industry with high risk and high competitiveness. It is important to keep in mind when considering a comparison of industry players that competition does not arise between each company as a whole but rather between specific drug areas and their relative advantages in therapeutic treatment. For example, one of AstraZeneca's more successful blockbusters Crestor, constantly faces competition from the global cholesterol reducing leader Lipitor, produced by Pfizer. In addition to direct competition with peers, AstraZeneca also faces the risk of a decline in sales when peer drugs come off patent (ex. when Lipitor loses patent Crestor will face greater generic challenges.) In short term, AstraZeneca has an advantage over its peers due to its strong positioning in multiple drug markets and relatively young portfolio of drugs. However, in the long term, AstraZeneca lacks the pipeline to maintain this robust portfolio. These facts are reflected in the fact that AstraZeneca has basically matched the unimpressive performance of the S&P 500 Healthcare Index for the past 5 years.

 AstraZeneca

	Select All  |  Select None Metrics Revenue by Geography - International Revenue by Geography - Europe Revenue by Geography - Asia Revenue by Geography - Latin America Revenue by Geography - Africa Net Income Operating Income Gross Profit Gross Margin R&D/Sales Ratio Number of Patents Number of Drugs Number of Drug Recalls Number of Drug Approvals New Drug Applications Return on Equity Revenue Revenue - Pharmaceuticals Revenue by Geography - United States Research and Development Expense Patents to Expire in next 5 years Number of Drugs in Phase I Number of Drugs in Phase II Number of Drugs in Phase III Cancel

	Select All  |  Select None Companies JOHNSON & JOHNSON (JNJ) Pfizer (PFE) GlaxoSmithKline (GSK) Sanofi-Aventis SA (SNY) Abbott Laboratories (ABT) Merck (MRK) AstraZeneca (AZN) Wyeth (WYE) Eli Lilly and Company (LLY) Bristol-Myers Squibb Company (BMY) Schering-Plough (SGP) Novartis AG (NVS) Cancel

Choose View:20042005200620072008Most Recent

2004 Data

2005 Data

2006 Data

2007 Data

2008 Data

Most Recent Data Available

+ Select more metrics (24)

Company	Data From	Revenue	Revenue - Pharmaceuticals	Revenue by Geography - United States	Research and Development Expense	Patents to Expire in next 5 years	Number of Drugs in Phase I	Number of Drugs in Phase II	Number of Drugs in Phase III
AstraZeneca (AZN)	2007	$29.6B[3]	$29.6B[4]	$13.4B[4]	$5.16B[3]	Add	41[5]	20[5]	10[6]
Bristol-Myers Squibb Company (BMY)	2007	$19.3B[7]	$15.6B[8]	$10.8B[9]	$3.28B[7]	Add	Add	Add	5[10]
Merck (MRK)	2007	$24.2B[11]	$20.1B[12]	$14.7B[13]	$4.88B[11]	8[14]	23[15]	17[15]	7[15]
Novartis AG (NVS)	2007	$39.8B[16]	$24.2B[17]	$14.2B[18]	$6.43B[16]	Add	1[19]	22[19]	42[19]
Sanofi-Aventis SA (SNY)	2007	$28.1B[20]	$25.3B[21]	$9.47B[22]	$4.54B[20]	Add	21[23]	19[23]	18[23]

+ Select more companies (12)

See all Drug Manufacturers Industry WikiData

[edit] References

1. ↑ http://www.reuters.com/article/businessNews/idUKWLA574020080702
2. ↑ Trotta, Elizabeth. "AstraZeneca Shares Rise on Study Results." TheStreet.com. 10 November, 2008
3. ↑ ^{3.0 3.1} 2007 AZN 20-F: Pg 118
4. ↑ ^{4.0 4.1} 2007 AZN 20-F: Pg 128
5. ↑ ^{5.0 5.1} 2007 AZN 20-F: Pg 28
6. ↑ 2007 AZN 20-F: Pg 29
7. ↑ ^{7.0 7.1} 2007 BMY 10-K: Pg 85
8. ↑ 2007 BMY 10-K: Pg 124
9. ↑ 2007 BMY 10-K: Pg 125
10. ↑ 2007 BMY 10-K: Pg 25
11. ↑ ^{11.0 11.1} 2007 MRK 10-K: Pg 84
12. ↑ 2007 MRK 10-K: Pg 133
13. ↑ 2007 MRK 10-K: Pg 135
14. ↑ 2007 MRK 10-K: Pg 13
15. ↑ ^{15.0 15.1 15.2} 2007 MRK 10-K: Pg 15
16. ↑ ^{16.0 16.1} 2007 NVS 20-F: Pg F-4
17. ↑ 2007 NVS 20-F: Pg F-22
18. ↑ 2007 NVS 20-F: Pg F-24
19. ↑ ^{19.0 19.1 19.2} 2007 NVS 20-F: Pg 28-31
20. ↑ ^{20.0 20.1} 2007 SNY 20-F: Pg F6
21. ↑ 2007 SNY 20-F: Pg 82
22. ↑ 2007 SNY 20-F: Pg96
23. ↑ ^{23.0 23.1 23.2} 2007 SNY 20-F: Pg 37