AstraZeneca (LSE: AZN) (NYSE: AZN.US) has had a challenging few years, with its ‘patent cliff’ being a key reason why shares have struggled to make ground.
However, 2013 has been a completely different year for the company, with news flow being positive rather than negative and the company getting on with making a comeback from the previous year’s disappointment.
Indeed, I believe there is yet more encouraging news flow to come, with AstraZeneca continuing to make progress towards its goal of repairing the damage caused by the loss of key ‘blockbuster’ drugs and the lack of suitable replacements.
In turn, I believe that it is only a matter of time before the market realises that AstraZeneca is in a very different situation to where it was at the start of 2013 and that, moreover, it is turning itself around and sowing the seeds for future growth.
However, strong news flow is not the only reason why I’m keen to buy more shares in AstraZeneca.
Indeed, although the company is in the process of losing the exclusivity it had on many of its patented blockbuster drugs, it not only continues to have an attractive portfolio of patented drugs, but is also acquiring companies that themselves enjoy relatively high barriers to entry.
So, although entry barriers are perhaps not quite as high as they once were, AstraZeneca remains a very difficult company to compete against. Furthermore, as it continues to make acquisitions in niche areas it will develop further specialisms and capabilities, thereby increasing entry barriers still further. In turn, this should mean that margin growth once again appears on the horizon.
In addition, I believe that shares currently offer good value when looked at using the price-to-earnings (P/E) ratio. AstraZeneca currently trades on a P/E of 10 using 2013 earnings per share, while the FTSE 100 and wider healthcare industry group trade on P/Es of 15 and 16.8 respectively.
So, I believe that AstraZeneca’s news flow should continue to be strong, with it being just a matter of time before the market decides that shares deserve a higher rating. Furthermore, a relatively low P/E and barriers to entry mean that I want to add to my position in the company.