The AstraZeneca share price steadies: is this FTSE 100 stock a good investment?

The AstraZeneca share price is showing resilience in the face of disappointing vaccine publicity. This FTSE 100 stock has a lot to like.

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FTSE 100 pharmaceutical giant AstraZeneca (LSE:AZN) is showing resilience in the face of vaccine pushback. The company is behind one of the main vaccine rollouts, but 13 European countries have suspended the vaccine on concern it causes blood clots. However, the World Health Organisation (WHO) says there’s no evidence that the vaccine has any link to the clots. AstraZeneca’s share price seems to be holding steady despite the reports.

While the bad press is disappointing for the company, it has plenty of other projects in the pipeline to keep investors interested. Another Covid-19 therapy of note is its antibody treatment designed to boost the immune system of those unable to take the vaccine. The company has sold around $726m worth of this treatment to the US government year-to-date and analysts forecast it could bring in $3bn worth of revenue this year.

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AstraZeneca share price fluctuations

The AstraZeneca share price has endured a rather disappointing eight months after the excitement of its vaccine potential sent it rocketing above £93 a share back in July. Today it’s hovering around £72.

For the last 12 months, its price-to-earnings ratio (P/E) is still high at 40. But its forward P/E is a more reasonable 19 and earnings per share are £1.75. It offers shareholders a 2.8% dividend yield.

Acquisitions extend its reach

The company has also been making moves in cancer treatments and rare diseases. Late last year it announced a major acquisition of US biotech company Alexion Pharmaceuticals for $39bn. The AstraZeneca share price took a hit on the news because Alexion was reportedly worth around $26bn. This meant investors thought AstraZeneca had overpaid.

However, many are starting to see the future benefits in owning Alexion, the purchase of which is set to complete in Q3. It should give AstraZeneca a much stronger presence in battling rare diseases. It should also help boost its offering of immunology drugs.

Alexion had a remarkable 2019, achieving six regulatory approvals, seven business development deals, and hiring 800 new employees. Its focus is on researching and treating rare and devastating diseases. This acquisition is not just strengthening AstraZeneca’s business, but it should help improve cash flow, allowing more money to be allocated to research and development (R&D). Analysts believe it may also lead to a stronger dividend payment.

In its bid to streamline the business, AstraZeneca also recently sold its stake in Moderna for over $1bn. This will help towards the Alexion acquisition.

Risks to the business

However, there are always risks worth being aware of and acquisitions can come with their own set of challenges. Legal risks abound, particularly when dealing with healthcare. Then there’s the fact AstraZeneca is paying over the odds. Will it generate enough cash and business opportunities to prove its worth? 

There’s also the risk of reputational damage if the vaccine (or other drug) doesn’t work out as planned. That’s the nature of pharmaceuticals and always a risk investors face.

With the impact of the Covid-19 pandemic not yet resolved, I believe much more focus and government money is likely to be willingly spent on healthcare R&D in the future. I like AstraZeneca and would happily add its shares to my long-term investment portfolio.

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Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has recommended Moderna Inc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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