FTSE 100 stocks represent the largest businesses on the London Stock Exchange. But size doesn’t always mean that growth can’t follow. That’s certainly been true for AstraZeneca (LSE:AZN) shares, which have climbed more than 60% in the last five years. And with management making moves in the rare diseases arena, this pharmaceutical giant may still have far to climb.
One of the biggest names in healthcare
The British stock market is home to many pharmaceutical companies. And in first place by market-cap stands AstraZeneca at £158bn. It’s actually the second largest company across the entire London Stock Exchange, with Shell being ahead by another £17bn.
The pharma giant has a vast portfolio of life-saving drugs and treatments, many of which have become blockbuster products generating more than $1bn in annual sales.
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Last week, management released a trading update for performance over the first nine months of 2023. And things continue to look promising, in my eyes. Total revenue growth was fairly modest at 2%, which doesn’t look great at first. However, this figure includes a massive deceleration in demand for Covid-19 vaccines, which were always going to be a temporary source of income.
Excluding the contributions of Covid-19 products, sales are up 12% year-on-year, with core earnings per share rising by 10%. This was driven by double-digit growth across the medicine portfolio. Most impressively, sales of Ultomiris – a treatment for a rare blood disease – surged by 50%!
Apart from helping boost the top line, the continued strong performance of the rare diseases portfolio is an encouraging sign, considering management paid $39bn to acquire it in 2021 in its takeover of Alexion.
Risk and reward
Investing in a pharmaceutical company, big or small, comes with some notable risks. The most promising is the threat of a failed clinical trial. Developing new medicines is a long and expensive process that can span over a decade or more.
There are countless stories of drugs making it to the final stages of clinical trials only to flop near the finish line. And even if a medicine is proven to work, a competitor might be one step ahead, receiving approval and turning a promising drug candidate obsolete.
AstraZeneca is no stranger to such threats. And even earlier this year, disappointing trial results were released for its Tropion lung cancer drug. The news saw 7% of the FTSE 100 stock’s market-cap wiped out in a single day. And as volatility goes, that can be quite modest for companies operating in this industry.
Nevertheless, with 148 candidates in its clinical pipeline, the firm’s R&D activities are quite diversified. And while most of these will likely fail to reach the market, it only takes one blockbuster drug to send AstraZeneca shares flying higher. That’s why I think this enterprise could be a lucrative investment for my portfolio in the long run.
