Broker snap: Downgrades likely for AstraZeneca, says Credit Suisse

2nd Oct 2012 10:18

Credit Suisse has reduced its forecasts for pharmaceuticals group AstraZeneca after the firm announced on Monday that it had suspended its share repurchase programme with immediate effect.In one of his first acts since becoming Astra's Chief Executive Officer (CEO) in August, Pascal Soriot revealed that the company has repurchased a net $0.7bn of shares since the end of the first half, bringing the year-to-date total to $2.3bn. The group's initial full-year target for repurchases stands at $4.5bn. "A new vision from a new CEO; perhaps no great surprise that he aims to 'maintain flexibility' whilst the board completes the strategy update," Credit Suisse said in a broker note.The firm reassured that its core earnings per share (EPS) target range for the full year remains at $6.00-6.30.Credit Suisse says that simply removing $2bn of buy-backs from its model results in a three percentage point reduction in its 2012-2016 EPS compound annual growth rate (CAGR) forecast. As a result of the loss of buy-backs as well as including the Bristol-Myers Squibb/Amylin deal, the broker's underlying EPS estimate fall by 5% in 2012 and by 15% in 2016."We believe today will likely mark the start of further EPS downgrades at AZN. The company will need to manage increasing generic competition in H2 and increased pressure on US Crestor with multi-generic Lipitor. We remain more cautious than consensus on the gross margin impact from the loss of Seroquel, the Brilinta launch, and growth in emerging markets," Credit Suisse said."With limited pipeline, patent losses, uncertainly over whether the slimmed down group has the firepower to market new drugs, and how they can restock their portfolio we reiterate our 'underperform' rating."Shares were down 0.18% at 2,919.66p by 10:18 on Tuesday.BC