FTSE 100 firm AstraZeneca (LSE: AZN) is currently down 11% from its 2020 high of 7,878p. The biopharmaceutical firm now hovers around 6,887p.
In my view, this company is a great buying opportunity right now. And the market appears to think so too. AstraZeneca is already up 9% from its coronavirus-related drop in March.
A wide economic moat
Some analysts say AstraZeneca has a wide economic moat. In plain English, this phrase refers to the firm’s large competitive advantage when compared with its peers.
The company is a major presence in the pharmaceutical and biotech industry. AstraZeneca is a highly regarded FTSE 100 household name. It is globally renowned for its patent-protected drugs. Its innovative developing pipeline deserves a mention too.
The firm’s new drug, Farxiga, performed better than expected in its drug trial. And the oncology drugs, Calquence and Enhertu, are expecting regulatory approvals this year. With Lynparza now approved in China, AstraZeneca’s fastest-growing region, the future for the firm’s medicines looks good.
In fact, the provision of new drugs is offsetting the patent losses experienced with the drugs Crestor and Nexium. These losses held down AstraZeneca’s potential growth. Offsetting them with successes will enable the company to move forward.
The FTSE pharma stalwart was expecting a large impact on business due to its high exposure to China. However, according to CEO Pascal Soriot the effect has so far been limited.
Pharma companies often do well in an economic downturn because the demand for medicines continues. In the same way, through a pandemic, the demand for pharmaceutical goods and services may even increase. Consequently, AstraZeneca is helping the UK government with the new coronavirus testing facility at Cambridge University.
But the biotech firm is focusing on more than the pandemic. It is working hard to reduce any impact of Brexit at the end of the year. The supply chain is already adjusted in preparation for the change. And it has diversified its customer base by expanding into emerging markets (EM). In 2019, revenues from EM investments increased by a whopping 84%. Sales in China alone jumped 35% to $4.9bn.
A top FTSE 100 dividend payer
The reliable AstraZeneca dividend currently sits above 3%. The defensive qualities of the FTSE 100 company are being noticed by the market. The shares reached record highs earlier this year and have been climbing steadily since the early 1990s. But, unusually in the current climate, the dividend appears to be relatively safe. I think this makes the stock extremely attractive.
The recent climb in the share price is in spite of 2019’s lower reported profits. It’s likely investors were taking into consideration the higher expenses related to drug launches and the Chinese expansion. These expenses pushed operating profit down 16% to $2.9bn.
AstraZeneca is certainly investing in its future. In 2019 alone, it spent $6.1bn on R&D. It has nine blockbuster drugs on the market and a very promising pipeline of label extensions and new therapies.
The firm is managing the coronavirus pandemic well. It is positioning for future growth and planning for any hurdles. I think AstraZeneca is a good buy.
