Nomura Securities Reiterates a 'Reduce' on AstraZeneca (AZN); Overpayment Risk in Deal with Bristol Myers (BMY)
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Price: $92.77 --0%
Rating Summary:
19 Buy, 8 Hold, 3 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
Rating Summary:
19 Buy, 8 Hold, 3 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
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Nomura Securities reiterates a 'Reduce' on AstraZeneca (NYSE: AZN).
Analyst, Dr. Amit Roy, said, "We reiterate our Reduce rating on the stock given our view that the USD 3.4bn deal with Bristol Myers Squibb (NYSE: BMY) for a 50% investment in US diabetes company Amylin is 5% value dilutive presenting, in our view, a USD 2.4bn overpayment risk. Given that Amylin is a loss-making business, future earnings growth is dependent upon cost synergies and top-line growth from recently-launched drug Bydureon. With earnings accretion expected from 2014, the Amylin deal does not have much impact on AstraZeneca’s five-year earnings growth to 2016, improving the 2011-16E CAGR by +70bps, on our forecasts, to -9.9%. For the deal to be value creative, we argue that either Bydureon (Amylin’s new diabetes drug) replaces the more efficacious market leader once-daily Victoza or the Bydureon market triples to >USD 5bn by 2016. Given that such straight-line market growth is unlikely, together with the fact that Bydureon is unlikely to benefit all patients given its lower efficacy versus Victoza, we regard neither scenario as likely. In addition to our more cautious forecasts for Bydureon sales, we believe that our behind-consensus sales expectations for Crestor and Brilinta, together with consensus’ optimistic 2012-17E USD 16.7bn share buy-back assumptions, leaves potential for earnings downgrades and the opening of a value trap with the shares trading on 7.7x ‘12e for 2011-16e EPS CAGR of -9.9%."
For an analyst ratings summary and ratings history on AstraZeneca click here. For more ratings news on AstraZeneca click here.
Shares of AstraZeneca closed at $47.14 yesterday.
Analyst, Dr. Amit Roy, said, "We reiterate our Reduce rating on the stock given our view that the USD 3.4bn deal with Bristol Myers Squibb (NYSE: BMY) for a 50% investment in US diabetes company Amylin is 5% value dilutive presenting, in our view, a USD 2.4bn overpayment risk. Given that Amylin is a loss-making business, future earnings growth is dependent upon cost synergies and top-line growth from recently-launched drug Bydureon. With earnings accretion expected from 2014, the Amylin deal does not have much impact on AstraZeneca’s five-year earnings growth to 2016, improving the 2011-16E CAGR by +70bps, on our forecasts, to -9.9%. For the deal to be value creative, we argue that either Bydureon (Amylin’s new diabetes drug) replaces the more efficacious market leader once-daily Victoza or the Bydureon market triples to >USD 5bn by 2016. Given that such straight-line market growth is unlikely, together with the fact that Bydureon is unlikely to benefit all patients given its lower efficacy versus Victoza, we regard neither scenario as likely. In addition to our more cautious forecasts for Bydureon sales, we believe that our behind-consensus sales expectations for Crestor and Brilinta, together with consensus’ optimistic 2012-17E USD 16.7bn share buy-back assumptions, leaves potential for earnings downgrades and the opening of a value trap with the shares trading on 7.7x ‘12e for 2011-16e EPS CAGR of -9.9%."
For an analyst ratings summary and ratings history on AstraZeneca click here. For more ratings news on AstraZeneca click here.
Shares of AstraZeneca closed at $47.14 yesterday.
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