According to its 2013 sales, AstraZeneca is the 7th largest pharmaceutical company in the world. The firm is publicly traded; primarily listed on the London Stock Exchange, it had a market capitalisation of approximately nearly £55BN on August 1st 2014, making the firm the sixth biggest entity on the Exchange at the time.
However, despite its significant position, and its renown around the world for groundbreaking ‘blockbuster’ drugs available at reasonable prices, many investors frequently ask themselves whether they should sell AstraZeneca shares – and for those without a current holding, the company can appear to be a less than fruitful investment prospect.
One of the reasons investors might find AstraZeneca a questionable prospect is that the firm is exposed to many potential profit depreciators; chief amongst these is the expiration of drug patents, which remove a company’s monopoly on the production and sale of ‘blockbuster’ medicinal products. AstraZeneca faces the termination of many highly lucrative patents before the end of the decade, naturally a source of worry to investors. To create new ‘blockbusters’ can take years, and requires significant investment. Investment into new products represents a risk for pharmaceutical companies – research and development processes are costly, there is no guarantee the process will produce an effective medicine, and even less assurance that the product will be popular once it is sold. Furthermore, in May 2014, the firm rejected a major bid for ownership from US chemical giant Pfizer; the fallout from the rejection saw key AstraZeneca investors (such as Schroders and AXA Investments) lambast the company in public for its refusal to sell, which resulted in a retreat in the firm’s share prices.
However, AstraZeneca made clear that the bid was refused on the basis that the offer did not fairly reflect the “attractive prospects” presented by company’s release schedule. Due for release are revolutionary cancer drugs, intended to fight the growth of malignant tumours in the ovaries, lungs and prostate. If successful, these products could represent a whole new stable of ‘blockbuster’ drugs available for general consumer purchase under the AZN banner, and a significant increase in profits; the company’s own projections place potential profits come 2023 at $45BN.
Some investors may have felt it justified to sell their AstraZeneca shares following the failed Pfizer bid, or reduce their exposure – or, in the least, keep a close eye on developments in the event conditions worsen. Some investors may, however, have held on dearly to their shares – and others may have seen the vast prospects presented by the firm’s new drug release schedule as a reason to buy AstraZeneca shares. Likewise, those after a speedy return may have seen the share dip resulting from investor fallout as a temporary dint, and seen the lower priced shares as a good opportunity to make an investment at an artificially low price. As with any investment, there are good reasons to buy, hold and sell AstraZeneca shares – it is a matter for the individual trader to decide based on the evidence available.
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