Big pharma firms have seen one major issue causing them trouble for many years now – the availability of cheap, generic versions of the drugs they researched and created as their patents run out. This week however, the release of its latest half-year figures suggests AstraZeneca (LSE: AZN) seems to be bucking this trend.
The numbers don’t lie
Thursday’s figures showed the fourth consecutive quarter of rising revenue for Astra, brought about in large part by strong sales performance for a number of its new drugs. Notably, its cancer medications Tagrisso and Imfinzi have been very strong performers, with H1 sales of $1.4bn and $633m respectively.
AstraZeneca has taken a somewhat different approach to cancer treatment compared to its major rivals. While the majority of research and money is spent on drugs aimed at the Stage 4 level of the disease, Astra has instead focused its efforts on early treatment and detection, carving a niche for itself in this competitive industry.
This has helped its numbers, with Q2 sales rising 19% to $5.7bn, while earnings per share came in at $0.73, beating expectations by more than ten cents. The company upgraded its product sales guidance for the year to “low double-digit figures” and said that in addition to its cancer treatments, it expects heart disease drug Brilinta and diabetic medicine Farxiga to reach so-called ‘blockbuster’ status, seeing annual sales in excess of $1bn each.
Buy high, sell higher!
Something I learned early in my investing career was that the old adage of buy low, sell high is easier said than done, and often works out as a losing strategy. Instead the phrase buy high, sell higher, might be better. Buying shares while they are on the up, hopefully as early as possible, can be a more consistent strategy. Looking at AstraZeneca, I think it may just be a candidate for this type of investment.
Its current share price is a solid £68, not far from its all-time highs, bringing about a dividend yield just above the 3% mark. While none of this seems to be a bargain exactly, I can’t help but think there is not likely to be a large enough dip in the price any time soon that would be worth waiting for (hopefully not famous last words). On the other hand, this upward trend could easily continue for the next year or so before coming up against any significant resistance (if even then).
The company did say that it doesn’t expect its performance in the second half of the year to be as strong as the first, but managing expectations like this usually helps avoid any nasty price shocks. Given the strength and breadth of its drugs portfolio, and notably its strong performance in China (Astra’s Chinese sales grew 44% in H1), where generic drugs are common, I think these latest figures could keep the share price climbing.
Karl 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.