The AstraZeneca (LSE: AZN) share price is in freefall at the moment. Yesterday (5 November), it fell 8.4%. Since late August, it has plummeted nearly 25%.
So, what’s going on here? And has the share price created a good buying opportunity for long-term investors to consider?
Share price crash
Let’s start with yesterday’s fall.
It seems this was primarily caused by a report that a number of senior executives at the pharma company’s China unit could be implicated in a major insurance fraud case.
Last week, AstraZeneca said that its China president Leon Wang was being investigated by authorities and would be standing down from his position.
However, according to financial media company Yicai, the investigation by Chinese authorities has now blown out to include ‘dozens’ of senior AstraZeneca executives, with multiple authorities getting involved.
It’s worth noting that problems in China have been plaguing the company for months now. In early September, police in the country detained five current and former employees of AstraZeneca for questioning about potential illegal activities. This issue was related to its collection of patient data and whether it infringed China’s data-privacy laws.
Sell rating
Another factor that has hurt the FTSE 100 stock in recent months is disappointing drug trial results. In mid-September, the shares fell after results from the company’s lung cancer trials showed that its experimental precision drug didn’t significantly improve overall survival results for patients.
Finally, there has been some negative broker commentary recently. For example, in September, analysts at Deutsche Bank slapped a Sell rating on the stock. It’s worth noting that yesterday, the same analysts described early data on AstraZeneca’s experimental weight loss pill as “somewhat underwhelming”.
So overall, there has been a lot of negative news for investors to digest here.
A buying opportunity?
But is now a good time to take a closer look at the stock?
My gut feeling is that it is.
The China issues are certainly a risk factor here. They could lead to reputational damage and/or large fines and put more pressure on the share price in the near term.
But I think the company can recover from these setbacks. I don’t think that they’re likely to impact the group too much in the long run.
As for the disappointing drug trial results, I don’t see these as the end of the world for the firm. That’s because AstraZeneca currently has nearly 200 drugs in its pipeline.
Turning to the valuation, the shares currently trade on a forward-looking price-to-earnings (P/E) ratio of about 14 after yesterday’s fall. That’s a relatively attractive valuation, in my view.
It’s worth pointing out that trying to ‘catch a falling knife’ can be dangerous. That’s because a stock in freefall can keep falling.
So, if I was interested in buying the stock, I would probably wait until it had stabilised a little. I’d also look to build a position over time and average out my entry prices.
