Right now I’m looking at some of the most popular companies in the FTSE 100 to try and establish whether or not they have the potential to return to historic highs.
Today I’m looking at AstraZeneca (LSE: AZN) (NYSE: AZN.US) to ascertain if its share price can return to 3,625p.
Initial catalyst
First of all, we need to establish what caused AstraZeneca to hit its all-time high of 3,625p per share during January of 2002. However, combing through AstraZeneca’s press releases, it appears that the only event announced by the company during this period was the approval of two cancer drugs.
Surprisingly, the approval-for-sale of Crestor, which became AstraZeneca’s bestselling product to date, came during November of 2002. I should also point out that AstraZeneca reached its all-time high of 3,625p per share at a time when the FTSE 100 as a whole was slumping, after the internet bubble burst during 1999.
But can AstraZeneca return to its former glory?
But can AstraZeneca’s share price return to 3,652p? Well, investors have been expressing concern for the past year or so about the company’s sliding sales following the company’s loss of exclusive manufacturing rights for its blockbuster Crestor treatment. Indeed, thanks to the loss of Crestor, City analysts are predicting that revenues will slump 10% this year followed by a 5% slump next year.
However, AstraZeneca’s management has not been complacent and has been trying to build up the company’s treatment pipeline, in an attempt to fill the void left by Crestor. What’s more, there are rumours that AstraZeneca could be hunting for a big fish to acquire, which could complete change the company’s outlook.
That said, a recent report put out by analysts’ at market data company Morningstar, revealed that out of all the major international biotechnology companies, AstraZeneca had the least promising treatment pipeline.
This AstraZeneca’s weak treatment pipeline does make me anxious. Nonetheless, investors are not placing a premium on AstraZeneca’s shares, which leads me to believe that many of the concerns over the company’s pipeline are already priced in. Indeed, AstraZeneca currently trades at a forward P/E of 11.4, compared to peer GlaxoSmithKline, which trades at a forward P/E of 14.2.
Foolish summary
Even though AstraZeneca’s new treatment pipeline lags that of its peers and the company’s sales are falling rapidly, market sentiment appears positive. In particular, AstraZeneca’s share price currently printed a 10-year high following rumours that the company was looking to acquire a US peer. This took the company’s share price within inches of 3,625p.
So overall based on AstraZeneca’s recent strength, I feel that the company’s share price can return to 3,625p.
