AstraZeneca plc’s (ADR) (AZN) Future Seems Positive: Merrill Lynch

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The company has to work on multiple options in order to expand its drug portfolio and drug pipeline to patch up the revenue loss of Crestor and Nexium

AstraZeneca plc (ADR) (NYSE:AZN) is going through a revenue decline due to the patent cliff side effects after the patent expiration of its blockbuster drugs Crestor and Nexium. The company is facing intense pressure from the investors and shareholders in order to diversify the plan of action for the future growth. 

Merrill Lynch analysts Sachin Jain and Graham Parry said in a report published on September 8, 2016 that the company still has potential to grow in the future, keeping in view the drug pipeline and expected acquisitions and mergers (A&M) in the near future to acquire novel molecules for the management and treatment of rare and life-threatening diseases.

According to the Merrill Lynch analysts, oncology drug Lynparza can generate billions of dollars. The drug was approved in 2014 by Food and Drug Administration (FDA) for advanced ovarian cancer associated with defective BRCA genes. The company is also working on breast and prostate cancer, along with its cardiovascular drug Roxadustat for anemia, which is expected to get approval by mid of 2017.

In addition, lung cancer treatment Tagrisso is expected to clinch $2 billion yearly as it is in final stage of development and is expected to be marketed in 2017. Crestor is indicated for the management of high cholesterol in the blood. After the patent expiration, the drug has shown a decline of 29% in the second quarter financial year (2QFY16) and overall US market revenue decline of 52%. 

On the other hand, the European markets showed a decline of 1% due to fierce competition after the launch of generics in the market. Nexium is also a victim of patent cliff and has a revenue decline of 13% after the patent’s expiration in May 2015. 

Compnay’s CEO Pascal Soriot has given assurance to the investors in 2014 that the company will generate $45 billion by 2023 with the launching of new molecules and therapies, but AstraZeneca has lowered the revenue guidance to $40-41 billion in 2QFY16.  According to the analysts’ expectations, the company will be able to generate $23 billion by 2023.

The company has to look for options for expansion of its drug portfolio in the lucrative fields of oncology and immunology. The company has a robust respiratory investigational molecules in the pipeline, which are expected to aid-in the revenue generation in future such as benralizumab and is ready for the regulatory approval by the end of 2016. The molecule is expected to generate $2 billion annually along with facing fierce competition from noteworthy drugs such as Cinqair marketed by Teva and GSK’s Nucala.

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