Why I’m thinking of AstraZeneca as a great long-term buy

Although there’s a lot of quality in the FTSE 100, I think one of the best FTSE stocks to hold for the long term is AstraZeneca (LSE: AZN). 

Numerous FTSE 100 companies are profitable with substantial competitive advantages. Many stocks in the leading index are also trading lower than their levels last year. But, in my view, few of them have AstraZeneca’s combination of quality and exposure to long-term trends and technology advancements. 

In terms of exposure to long-term trends, one of the most encouraging is AZN’s emerging markets business. Here’s more on the pharma giant’s rapidly growing division:

Fast growing emerging markets business

AstraZeneca has substantial exposure to emerging markets. For fiscal year 2019, 35% of the company’s total sales came from emerging markets. The pharma giant’s business in those markets grew 24% year-on-year at constant exchange rates to $8.16bn. In China, AstraZeneca’s business grew even faster, with sales rising 35% year-on-year at constant exchange rates to $4.48 bn. 

And there could be a lot more room for growth in emerging markets in the future. China’s economy could potentially outpace the US economy in the next decade. However, China’s pharmaceutical market only accounts for 8% of global sales, versus 48% for the US. 

One of the fastest growing big pharma companies in emerging markets

In terms of its big pharma peers, AstraZeneca is in a pretty good position, in my view. It was the fastest-growing top-10 multinational pharmaceutical corporation in emerging markets last year. In terms of 2019 prescription sales in emerging markets, the company was also the fourth-largest multinational. 

I think AstraZeneca’s status as one of the leaders in emerging markets among big pharma companies is good for the stock because it could ultimately give AZN a higher valuation. 

If the market prioritises emerging markets more as global economic growth returns, I believe AZN would be one of the first stocks that many investors would consider. That extra demand could translate into higher share prices. 

Going forward, I also think AstraZeneca’s total growth rate could potentially beat expectations. The company’s emerging markets business is growing rapidly and the segment will very likely account for a bigger percentage of total sales. While AstraZeneca’s emerging market sales grew 24% in constant currency last year, the company’s total sales only grew 13% in constant currency.

Covid-19 vaccine potential

In addition to its emerging markets potential, AstraZeneca has a promising Covid-19 vaccine candidate. Just recently, the company disclosed that its vaccine candidate produced similar immune responses in younger and older adults. Even better in my view, the adverse responses to the vaccine candidate among the elderly were lower. 

Given the elderly response data, I think there is potential for more upside if the vaccine is approved given the potential for a larger target market.

Foolish conclusion

AstraZeneca’s emerging markets business is growing quickly and has a lot of potential given the market’s huge populations, rising incomes, and unmet needs. 

In terms of AZN stock, I think it has substantial upside despite the fact that it hasn’t changed very much year-to-date.