Today I am outlining why AstraZeneca (LSE: AZN) (NYSE: AZN.US) could be considered an attractive addition to any stocks portfolio.
Drugs pipeline perking up
AstraZeneca has often been accused of lagging its industry rivals in terms of developing the next generation of sales-bursting products, a scenario made all the worse by exclusivity losses across a variety of products. But the appointment of Pascal Soriot last year marked a sea-change in the firm’s production profile, and a new-found determination to get the conveyor belt rolling is already paying rich rewards.
In July’s interims t
he company announced that it had 14 drugs in Phase III-stage testing, up from eight at the corresponding point last year. And since then AstraZeneca has added tralokinumab to this catalogue, a product which the firm hopes believes will be an industry leader in asthma treatment.
Elsewhere, the business received positive Phase III results for its gout-battling lesinurad drug in August, and it’s now in the process of applying for regulatory sign-off. AstraZeneca has also gained encouraging feedback from late-stage testing of its antibiotic ceftazidime-avibactam, used to combat abdominal infections, and for which it’s hoping to file for approval in the European Union at the beginning of next year.
In the medium-term, the ongoing problem of revenue-crippling patent expirations is likely to keep earnings at AstraZeneca underwater. Indeed, City analysts expect the business to follow two consecutive annual drops with declines of 13% and 6% in 2014 and 2015 respectively.
But with AstraZeneca’s extensive R&D restructuring and global lab-building programme set to boost the pipeline significantly from 2018, more patient investors could enjoy the fruits of terrific earnings growth in coming years.
Competition-smashing yields on offer
In the meantime, the impact of more bottom-line pressure this year and next is expected to result in a slight cut in AstraZeneca’s full-year dividend. The number crunchers have currently pencilled in a dividend of 272 US cents per share for both 2014 and 2015, down from the 280-cent payment last year.
Still, these projections create sizeable yields of 3.7%, comfortably surpassing the 3.2% FTSE 100 forward average as well as a corresponding readout of 2.5% for the complete pharmaceuticals and biotechnology sector. And the firm’s payout profile could enjoy a further boost should its testing programme keep on delivering.