AstraZeneca plc (LON:AZN) (LSE:AZN.L) has released a Q4 update today. Total revenue in the quarter declined by 12% at CER, with product sales down 15%. This primarily reflected the entry of Crestor generic medicines in the US, with Crestor the last anticipated blockbuster patent expiry ahead of significant late-stage pipeline news flow.
Encouragingly for AstraZeneca’s investors, it made upbeat progress on cost control. Reported and core R&D cost growth of 2% and 5% respectively included the absorption of the R&D costs of Acerta Pharma and ZS Pharma. Further, reported and core SG&A costs declined by 12% and 9% respectively. This helped to increase reported EPS by 9% to $2.77, which reflected a revaluation of acquisition-related liabilities.
Looking ahead to FY2017, AstraZeneca expects total revenue to decline by a low to mid-single digit percentage. It forecasts core EPS to fall by a low to mid-teens percentage. In my view, this is reflective of the changing nature of the business and its transition. The company states in today’s investor update that it expects 2017 to be a turning point, as it nears the end of its patent-expiry period.
In the last six months, AstraZeneca’s share price has fallen by 16%. That’s behind the performance of healthcare stocks such as GlaxoSmithKline plc (LON:GSK) (LSE:GSK.L), Shire PLC (LON:SHP) LSE:SHP.L), Indivior PLC (LON:INDV) (LSE:INDV.L) and Smith & Nephew plc (LON:SN) (LSE:SN.L). Shire has declined by 12%, GlaxoSmithKline is 9% lower, Indivior is up 4%, while Smith & Nephew has moved 4% lower.
In my view, AstraZeneca is a sound long term buy. I believe the problems it is experiencing with a loss of patents could now be coming towards a close. I feel a new company could start to emerge over the next few years as the investment made in its pipeline begins to bear fruit. 2017 is forecast to be another tough year for the company, with sales and profit declines expected. However, I think the stock could make for a relatively strong performer beyond this year.