AstraZeneca (or 'the company') is a UK-based global biopharmaceutical company.The company isengaged in the development manufacture, and marketing of prescription biopharmaceuticals inprimarily in the therapeutic areas of cardiovascular, gastrointestinal, neuroscience, oncology,respiratory, inflammation, and infection.The company’s biologics pipeline has some promisingproducts that are expected to help the company offset generic erosion in its small molecule productsales growth. However, pricing and healthcare cost containment measures are likely to affectAstraZeneca's sales growth and operating profit margin.
In our opinion, AstraZeneca's moat will face challenges in th next few years. AZN’s moat comes from patent protection, an entrenched salesforce, and economies of scale. AZN holds a relatively high exposure to generic competition over the next several years as the face the massive patent losses on gastrointestinal drug Nexium and cholesterol reducer Crestor in 2015 and 2016. The company’s pipeline has promise as Astra's PD-L1 drug for lung cancer will be a major blockbuster. AZN is cutting costs.
Revenue generation is likely to prove challenging for AstraZeneca this year. Nexium sales have been in decline over the past several years, generic erosion is now expected to take a more sizable chunk out of sales in 2015 (our current model reflects a 50% decline versus 2014). Nexium accounted for about 14% of Astra's total revenue last year. The patent expiration of Crestor looms large. Despite a 2% dip in sales last year, Crestor remains AstraZeneca's top-grossing product ($5.5 billion in 2014 annual sales), and accounts for more than 20% of the total revenue base. Management remains confident that recent launches and its exciting lineup of drugs in development will be sufficient in restoring stability.
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Diversification into biologics and vaccines via MedImmune and CAT
Increasing market acceptance of recently launched products
Cost controlling measures enabling AstraZeneca to improve operational efficiency
Heavy dependence on small moleculesexposing AstraZeneca’s sales growth togeneric competition
Healthcare cost containment measures kely to affect AstraZeneca's sales growth and operating profit margin
Abbreviated approval processes for biosimilars may affect commercial prospects of AstraZeneca’s future biologics
Volatile foreign exchange rates likely toaffect the company’s operating results
Gaining full ownership of the global diabete salliance with Bristol-Myers Squibb
Successful development and launch of lesinurad could drive top-line growth
Collaborations with Amgen and Ironwood to develop biopharma products
Aging global population and increasing unmet medical needs
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