Is AstraZeneca plc A Super Growth Stock?

2014 has been a great year for investors in AstraZeneca (LSE: AZN) (NYSE: AZN.US). Indeed, shares in the pharmaceutical stock are currently up 17% while the FTSE 100 is down around 1% year-to-date. However, as many investors are well aware, AstraZeneca is currently facing a major challenge: patent expiry and subsequent generic competition. Does this mean that it shouldn’t be viewed as a top growth stock? Or does AstraZeneca have strong long-term growth potential?

The Patent Cliff

As mentioned, AstraZeneca is experiencing a loss of patents on many of its blockbuster drugs, with generic competition causing revenues to fall significantly as a result. The impact on the company’s bottom-line has been savage, with AstraZeneca reporting a fall in earnings per share (EPS) of 6% in 2012 and a whopping 26% fall in 2013. Furthermore, the next couple of years are unlikely to see much of an improvement, as AstraZeneca’s EPS is forecast to fall by a further 14% this year and by 2% in 2015.

A Strong Pipeline

On the face of it, then, AstraZeneca does not look like a super growth stock. Indeed, over the next couple of years that is likely to be the case. However, AstraZeneca recently announced results that show its drug pipeline is going from strength to strength, with its oncology pipeline looking particularly strong as a result of Phase 2 trials that went well. As a result, AstraZeneca is moving ahead with Phase 3 trials in both drugs, and is also planning late-stage trials for two drugs that treat breathing disorders.

astrazenecaThis pipeline means that, while short-term growth may be lacking, AstraZeneca is well positioned to deliver longer-term growth for shareholders. An indication of the attractiveness of its prospects can be seen in rumours surrounding a possible £60 billion bid from Pfizer for the entire company. Clearly, AstraZeneca has potential.

Looking Ahead

Of course, such potential is unlikely to come cheap. However, AstraZeneca does not appear to be overly priced, with shares currently trading on a price to earnings (P/E) ratio of 14. This compares well with the FTSE 100, which has a P/E of 13.3. Indeed, although the short run may not be full of growth, the medium to long-term could prove to be a completely different story. With the market seemingly looking beyond the next two years, it seems as though AstraZeneca could continue to perform well and deserves to be described as a super (long-term) growth stock.

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Peter owns shares in AstraZeneca.