AstraZeneca plc isn’t the only pharma stock I’d buy today

In this article I wish to talk about FTSE 100 pharma giant AstraZeneca (LSE: AZN) but, before I do, I would like to look at another medicines firm making the headlines on Tuesday – Cambridge-based Abzena (LSE: ABZA).

In recovery

Abzena provides technologies and complementary services to drug companies across the globe. It was last dealing at 10-week highs after advising that group revenues had risen to £9.6m during April-September from £4m in the same period last year, helping gross profit advance to £4m from £3.8m previously.

Adjusted losses at the firm, however, increased to £7m from £3.1m a year earlier.

Today’s solid update comes hot on the heels of positive contract news on Monday. Abzena advised then that it will assist a US biotech company “to provide process development and manufacturing services to progress a novel antibody-drug conjugate towards clinical trials” in a deal valued in excess of $5m.

The company’s share price plummeted back in September after it shocked the market with news that revenues in the fiscal year to date has been below expectations and that, as a consequence, sales during the first fiscal half would “not be significantly higher” than year earlier. The firm said this was caused by “lower volumes in certain areas of the business, a small number of large projects that are taking longer to complete than expected, and certain other projects being delayed until the second half of the year.”

On the march

So today’s update should go some way to soothing the nerves of investors. Indeed, Abzena reiterated what it said in September that revenues in the second half should be higher than in the first six months.

Particularly cheering was its advice that “average bookings in the months since the period end are more than 30% higher than in the first half of the year.”

While City analysts are expecting pre-tax losses to swell to £12.6m this year from £9.5m last year, and Abzena is expected to remain in the red with an £8.5m loss in fiscal 2019.

However, the massive revenue opportunities afforded by the huge investment the company has made in its research and manufacturing capabilities are underlined by forecasts for revenues to boom from £24.1m in the current year to £34.3m next year.

With Abzena making all the right noises again, I reckon we could see the company’s share price spring higher once more.

A footsie favourite

I am convinced that AstraZeneca is also very much on the path to powerful profits expansion.

Impatient growth investors may want to throw in the towel as City brokers are expecting earnings to keep on struggling a little longer (falls of 10% and 5% are forecast for 2017 and 2018 respectively).

However, I remain confident that AstraZeneca’s improving pipeline, and particularly in the oncology arena, should deliver the profits growth we have been seeking for some time now. Indeed, last month regulators in the US approved the firm’s asthma battler benralizumab in a move that could begin to unlock fresh new revenues streams

Share pickers can also take comfort in the meantime from the drugs giant’s huge yield,s which stand at 4.4% through to the close of next year.

I reckon AstraZeneca’s long-term investment case remains compelling, as does the company’s very-reasonable forward P/E ratio of 17.1 times.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended AstraZeneca. 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.