How Will AstraZeneca (AZN) Stock Respond To U.S. Clearing Heart Drug Trial?

NEW YORK (TheStreet) -- Shares of AstraZeneca (AZN) are slightly higher in pre-market trade after the U.S. Justice Department cleared  the biopharmaceutical company over a major clinical trial used to win marketing approval for its important new heart drug Brilinta, following an investigation which had cast a shadow over its prospects, Reuters reports.

The company said the government was closing its investigation into the 18,000-patient study and no further action was planned.

AstraZeneca views Brilinta as a potential $3.5 billion-a-year seller, but news last October that the DOJ was quizzing the company about the way it conducted the trial raised doubts over its medical value, causing sales growth to stall, Reuters noted.

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TheStreet Ratings team rates ASTRAZENECA PLC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate ASTRAZENECA PLC (AZN) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • AZN's revenue growth has slightly outpaced the industry average of 4.5%. Since the same quarter one year prior, revenues slightly increased by 0.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, AZN's share price has jumped by 36.65%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, AZN should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The gross profit margin for ASTRAZENECA PLC is currently very high, coming in at 90.79%. It has increased significantly from the same period last year. Despite the strong results of the gross profit margin, AZN's net profit margin of 7.66% significantly trails the industry average.
  • ASTRAZENECA PLC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, ASTRAZENECA PLC reported lower earnings of $2.04 versus $4.94 in the prior year. This year, the market expects an improvement in earnings ($4.38 versus $2.04).
  • Despite currently having a low debt-to-equity ratio of 0.48, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further.
  • You can view the full analysis from the report here: AZN Ratings Report
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