At time of writing, AstraZeneca (LSE: AZN) is trading at 4,552p — a new 52-week low for the company. And this low caps three months of aggressive selling, which has seen Astra’s share price slump by nearly 17% since mid-April.
For long-term investors, however, these declines have offered an excellent buying opportunity.
Going against the grain
Both Astra and its larger peer, GlaxoSmithKline, have slumped to 52-week lows during the past week. These declines have been driven by a wider sector contraction.
For example, the healthcare sector has fallen by 10% since the beginning of April. It seems that investors have been taking money off the table, after a year of impressive gains for the sector.
However, during the past six months news flow from Astra has been broadly positive. For this reason, I believe that it is now time to buy the company while it trades at a 52-week low.
Plenty to look forward to
Neil Woodford — undoubtedly one of the UK’s most successful fund managers — is a huge fan of Astra. The company constitutes 7.2% of his flagship CF Woodford Equity Income fund, and it’s easy to see why.
To understand Astra’s investment case you need to take a long-term view. The company has one of the best treatment pipelines in the pharmaceutical business, and it has tremendous potential.
Astra has 119 projects in its clinical development pipeline. During 2015-2016 alone, around a third of these will progress to the next stage of development.
The really exciting part of Astra’s pipeline are the group’s ‘immuno oncology’ cancer treatments currently under development. Astra is currently conducting 72 trials of these new cancer treatments, some of which have already yielded substantial results.
Specifically, at the American Society of Clinical Oncology meeting earlier this month, Astra presented what management called “truly exciting” results for a number of treatment trials.
Growth initiatives
Alongside the development of new oncology treatments, Astra has a number of other growth initiatives that it is working on. These include the company’s Brilinta blood thinner, which has been shown to significantly lower the risk of heart attacks for existing heart patients.
Additionally, Astra is working on increasing the sales of its diabetes and respiratory treatments as well as growing its presence within the Japanese market. Sales across these four growth platforms expanded by 13% during the first quarter of this year.
Targeting growth
Astra’s management is so confident about the potential of the company’s treatment pipeline that it believes the company’s sales will accelerate to £45bn by 2023.
At first glance, this figure appears unrealistic. However, the fact that Astra’s management is willing to make this lofty forecast is exciting — it shows that management believes in the company. What’s more, a long-term target gives investors an element of clarity over future growth.
Paid to wait
It will take time for Astra to return to growth, but the company is one of the FTSE 100’s dividend champions, and investors will be paid to wait.
At present, Astra supports an attractive dividend yield of 4.3%, and this payout should be here to stay, as it is linked to management compensation.
