Astrazeneca. Pharmaceutical companies have been under the cosh for over five years, even as most asset prices and equity indices roared. The reasons are well known: tougher government pricing policies globally, greater hurdles to have new drugs approved, patent expiry, then loss of market share to generic producers, and the ever-rising costs of research to produce more and more specific drugs, i.e. the glory days of 'global blockbusters' are very hard to replicate. As a consequence, the de-rating of large pharmaceutical companies has been intense, in the case of Astra to a single-digit forward multiple and a near-5% and well-covered dividend yield. Such numbers assume Armageddon and that no new drugs are licensed or successful. Market valuations imply that all R&D actually destroys value. This reaction to past over-exuberance is wrong: the whole sector is cheap. Moreover, a global trend of splitting research, manufacture and sales will slowly unlock value.
| Sedol |
Type |
Price |
Date |
| 0989529 |
Buy |
£ 21.683 |
22/01/2008 |
|
