AstraZeneca (LSE: AZN) continues to be a must-buy, in my opinion, for a long-term dividend-based portfolio. The British-Swedish multinational has gone from strength to strength in recent years, with a steadily climbing share price to back it. In a highly competitive and risky market, I feel the company’s impressive oncology portfolio has much potential for future gains.
In comparison to the rest of the UK pharmaceutical market, it may appear to be priced over the industry average, but it is a company to be admired for its innovative developments and varied areas of expertise.
Vast and varied portfolio
AstraZeneca has a portfolio of products for major disease areas including cancer, cardiovascular, gastrointestinal, infection, neuroscience, respiratory and inflammation.
Lynparza, a drug which Merck shares rights to, recently gained approval to treat Metastatic Breast Cancer and BRCA-mutated breast and ovarian cancer.
Farxiga, a medication used to treat type 2 diabetes, developed by Bristol-Myers Squibb, in partnership with AstraZeneca, has gained approval in the European Union to help treat type-1 diabetes. This is the first AstraZeneca medicine ever approved for type-1 diabetes and is used in oral form to aid insulin treatment in patients whose glucose levels are not adequately controlled with insulin alone.
Although the AstraZeneca dividend may seem mediocre at 3.65%, it remains consistent and reliable. This is a respected and innovative company continuing to produce superior products in a high-risk, high-reward sector.
Failure breeds success
AstraZeneca fell 11 places in this year’s Pharmaceutical Innovation Index 2019, most likely because it was hard hit by phase III trial failures in immuno-oncology (a unique approach that uses the body’s immune system to help fight cancer), COPD, Lupus and Alzheimer’s. Unfortunately, failure is an inevitable and vital part of research and development, which I deem necessary for successes to be realised.
Generic variants of profitable drugs are an ever-present problem for pharmaceutical companies. AstraZeneca’s Faslodex has been replicated and launched in generic form by competitor Novartis. This drug is used in treating hormone receptor-positive metastatic breast cancer and represented 5% of AstraZeneca’s total sales in 2018. Although the launch of the generic is recent, its likelihood has been in the pipeline for years. Back in 2016 a court settlement put off generic competition until March 2019, so a launch was inevitable. In my opinion, the profit-eating pressures caused by generics has already been factored into the share price.
On the upside, sales of new medicines this year is up an impressive 83% from the same period in 2018. Chief Exec Pascal Soriot has focused on creating an admirable R&D culture, which is getting products through development to pharmacy shelves.
Slow and steady wins the race
AstraZeneca is focused on lasting growth and maintaining its leading position in the global immuno-oncology market. It is a world leader, with positive earnings growth forecast for the next two years, according to City analysts. For these reasons I see its share price continuing to move onwards and upwards.
Factors continuing to affect the long-term success of big pharma companies such as AstraZeneca include international drug pricing, the growth of pharmaceutical products from China and the ever-present Brexit.
All companies in this sector face ups and downs, but I believe the overall ups and reliable dividend pay-out make AstraZeneca a company worth long-term investment.
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Kirsteen 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.