Will AstraZeneca plc Turn Around Its Underperformance Of GlaxoSmithKline plc, Shire PLC, Hikma Pharmaceuticals Plc And Smith & Nephew plc After Update?

AstraZeneca plc (LON:AZN) has lagged GlaxoSmithKline plc (LON:GSK), Shire PLC (LON:SHP), Hikma Pharmaceuticals Plc (LON:HIK) and Smith & Nephew plc (LON:SN) in the last month

AstraZeneca plc
AstraZeneca plc

AstraZeneca plc (LON:AZN) (LSE:AZN.L) has released a Q3 update. Revenue declined by 3% in the year to date, reflecting a fall in product sales that was driven by the entry into the US market of multiple Crestor generics. However, this was offset to an extent by continued cost discipline. AstraZeneca reduced reported and core SG&A expenses by 8% and 12% respectively in Q3.

Although core EPS declined by 10% in the year to date, AstraZeneca is still on-track to meet full-year guidance. AstraZeneca expects to post a low to mid-single digit decline in both sales and earnings for the full year. This is reflective of the increased competition it faces, particularly regarding Crestor.

AstraZeneca’s late-stage pipeline continues to advance at a rapid rate. It is entering a period of intense news flow over the next year which will reveal the potential of its Immuno-Oncology and targeted medicines. They have the potential to provide a boost to AstraZeneca’s sales and earnings outlook over the medium to long term.

AstraZeneca’s focus on reducing costs allows it to invest more heavily in areas such as Oncology, as well as in increasing its exposure to growth markets such as China. However, its shares continue to disappoint. They have fallen by 12% in the last month, which is a worse performance than sector peers GlaxoSmithKline plc (LON:GSK), Shire PLC (LON:SHP), Hikma Pharmaceuticals Plc (LON:HIK) and Smith & Nephew plc (LON:SN). For example, GlaxoSmithKline has fallen by 6%, Shire is down 3%, Hikma has slumped by 11% and Smith & Nephew has moved 10% lower.

In my view, AstraZeneca has long term investment appeal. Its pipeline has the potential to improve its financial performance. When combined with a successful cost-cutting programme, I believe that AstraZeneca’s performance will improve in future.