A medium size company with sky high growth potential
If you’re looking for a good “middle-ground” investment that offers a good mix of risks and rewards, British firm AstraZeneca plc (ADR) (NYSE:AZN) is definitely worth a look. With a trailing P/E of only 11.38 and a market cap of just over $60 billion, AstraZeneca plc (ADR) (NYSE:AZN) has plenty of room to grow. The company enjoys a 21% profit margin on $27 billion in revenue. There is $10.2 billion worth of debt on its balance sheet, but the company maintains some $8 billion in cash.
Best of all, the company has 71 drug candidates in trials and 13 drugs which have already been approved or are in the process of approval. The company also recently poached Pascel Soriot, a widely respected industry expert, to come on board as CEO and restructure the company. AstraZeneca could definitely be a big winner in the years to come.
Evaluating the pharmaceutical industry as a whole
With the population across emerging markets becoming wealthier, millions more customers will soon be able to afford more expensive drugs and medications. And with the increasing enforcement of copyright laws, pharmaceutical companies will be able to benefit from this growth. At the same time markets such as the United States and Japan will continue to age and older populations will require increasing treatments and drugs to maintain their health. These combined shifts in demographics should present ample opportunity for industry growth. Analysts now expect the industry to record 5% CAGR through 2017.
As with any investment, investments in pharmaceuticals will come with their own risks. If you choose to invest in pharmaceutical stocks, you should closely monitor product pipelines, and the performance of current products. AstraZeneca is looking to be in a particularly strong position with 13 products that will soon be entering the market. And if Puma Biotechnology Inc (NYSE:PBYI)’s PB272 proves successful, the stock price could skyrocket.
You will also need to watch out for pending lawsuits or rising medical hazards from drugs. Right now, Pfizer Inc. (NYSE:PFE) is facing lawsuits over Bextra and Celebrax for cardiovascular risks. So far, a judge has dismissed several claims but is allowing the case to move forward. AstraZeneca, on the other hand, recently won a patent protection lawsuit for Crestor, its top-selling drug. Now, the drug will be protected until 2016.
The risk of drugs failing in clinical trails, or lawsuits emerging over various issues, does make the pharmaceutical industry a high-risk, high reward industry. Still, for investors who make the right picks, returns can be substantial.
The article Strong Product Pipelines Have Pharmaceutical Companies Poised for Growth originally appeared on Fool.com.
Colin Tweel has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Colin is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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