Why AstraZeneca plc’s Future Will Be Decided This Weekend

AstraZeneca’s (LSE: AZN) future growth rests on the success of the company treatment pipeline, and Brilinta is one of the company’s most important treatments under development.

Brilinta is a blood thinner and, according to the City’s top pharmaceutical analysts, it is Astra’s best chance of returning to growth.

The drug has huge potential. According to analysts, Brilinta could be Astra’s next blockbuster treatment and it’s estimated that annual sales of Brilinta could top $5.5bn by 2020. Astra reported fourth-quarter 2014 revenue of $6.7bn, so it’s clear how important the commercialisation of this treatment is to the company.  

And on Saturday, the results of a key study on Brilinta’s potential will be released. 

A key study

The study, known as PEGASUS, will be officially published this weekend. Although Astra’s management has already revealed that the PEGASUS study showed a statistically significant reduction in patent mortality with no unexpected safety issues while using Brilinta.

Nevertheless, until the final, official report is published on Saturday, any speculation on the success of Brilinta is just that: speculation.  

Still, there’s no doubt that any positive data in PEGASUS should help unlock Brilinta‘s multi-billion-dollar potential. This would complete a major milestone of Astra’s plan to return to growth by 2017.

Plenty of room for growth 

Brilinta is not Astra’s only chance to turn around its fortunes. Many analysts believe that the company has one of the best treatment pipelines of all European pharmaceutical companies.

In particular, Astra has eight potential blockbuster treatments in their late stages of development. All eight treatments are facing critical milestones during the next 18 months. 

It is estimated that these eight treatments alone could generate sales of up to $25bn by 2023. These figures show that Astra’s best days are ahead of the company. 

Valuing growth

Based on these growth prospects, Astra deserves a premium valuation. Pharmaceutical companies rely on their treatment pipelines to keep sales growing and in many respects, every drug maker should be valued according to the prospects of its treatment pipeline. 

On this basis, Astra deserves to trade at a premium to its European peers as analysts believe that the company has one of the best pipelines in Europe. 

Astra’s main European peers are SanofiRoche and Novartis, and these three trade at an average forward P/E of 19.4. Astra, on the other hand, is currently trading at a forward P/E of 16. So the company looks to be severely undervalued compared to its European peers. 

There’s also Astra’s dividend yield to consider, which currently stands at 4.2%, compared to the FTSE 100’s average dividend yield of 3.5%.

And whatever your preference, be it long-term growth or income, your portfolio should always contain a selection of dependable dividend-paying stocks. However, dependable dividends are not easy to find, there are plenty of companies out there that have cut their payouts at a moment's notice.

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.