Broker snap: Credit Suisse reiterates underperform on AstraZeneca

12th Dec 2011 09:36

Analysts at Credit Suisse have issued a rather downbeat research note on pharmaceutical giant AstraZeneca this morning. While they believe that the company's share price already reflects "the material patent expiry burden facing AstraZeneca," they are not so sure that the same can be said of the possible impact that the loss of the drug Seroquel will have on its gross margins, of what the success of the Brilinta launch may be or what growth in emerging markets may be like. In particular, these analysts emphasize that they expect the company to cut spending on research and development in 2012, "in an effort to offset the loss of high margin sales." However, if the company is to remain a pure Pharma business then, in their opinion, material further cuts to R&D "are not feasible."Aggravating the above are the following factors: limited notable pipeline, key mature brands are losing patent protection and net cash on the balance sheet (pre provisions) means that there is a significant risk that Astra Zeneca makes a major acquisition. Amongst the key catalysts in 1st Half 2012 will be the release of the company's Fiscal Year 2011 results on 2nd February, the outcome of the Seroquel XR patent trial (timing unknown) and Crestor sales impact from generic Lipitor (on-going). Credit Suisse reiterates underperform and its 2,600p price target. AB