Investment: Problems under the surface at Zeneca
Friday 07 August 1998
It has a decent drugs portfolio - its asthma treatment Accolate is still the star performer - backed up by a pipeline with a couple of potential best-sellers. The agrochemicals division, which has been a drag on earnings for some time, is set to benefit from recent restructuring, with fungicides already delivering growth.
Add a problem-free balance sheet and you can see why the market believes Zeneca is strong enough to keep its promise of growing underlying earnings by 15 per cent a year.
Yesterday's first-half results, which showed a 2 per cent slide in profits to pounds 654m after a heavy hit from sterling, Asia and the millennium bug, did little to dent this belief. The shares firmed 15p to 2280p after a pretty poor run in the weeks leading up to the figures.
So can Zeneca be discharged with a clean bill of health? Not really. If investors scratch the surface, they will see that some of the star drugs - including two blockbusters, the hypertension treatment Zestril and the cancer drug Novaldex - are set to lose patent protection in 2002. The new compounds which were supposed to replace them, notably the schizophrenia drug Seroquel, have got off to a slow start while the mature ones will suffer from increased competition.
At the same time, the agrochemicals division will be hit by difficult market conditions and shrinking margins. True, Zeneca could be taken over by one of the pharmaceutical giants, but no credible suitor willing to pay a premium has materialised despite years of speculation. And with the shares trading at almost 30 times expected 1998 earnings of around pounds 1.1bn - a 60 per cent premium to the market - the prescription is: sell into strength.
- 1 Man who held up 'hire me' sign at Waterloo station returns a year later with 'I'm hiring' sign
- 4 Tennis fan suing Australian Open organisers for 'failing to shade spectators' during Murray match
- 5 This crazy skiing video will leave you feeling queasy
Man who held up 'hire me' sign at Waterloo station returns a year later with 'I'm hiring' sign
Mother of newborn Baby No 59 trapped in sewer pipe told Chinese police she 'heard crying' when she raised alarm
Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
AirAsia QZ8501: Black box reveals warning alarms 'screamed' before crash, as more bodies recovered from near fuselage of jet
Rob Lowe hits out at White House decision not to meet Israeli leader
British Muslim leaders outraged after Eric Pickles says followers of Islam should 'prove their identity'
UK terror fears: My jihadist son returned from Syria mentally scarred – now he is being ignored
Nigel Farage: NHS might have to be replaced by private health insurance
Billy Crystal: 'Stop shoving gay sex scenes in my face'
French court convicts three over homophobic tweets, in case hailed as a 'significant victory' by LGBT rights campaigners
British Muslim school children suffering a backlash of abuse following Paris attacks
iJobs Money & Business
Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...
£16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...
£45000 - £47000 per annum + bonus + benefits: Ashdown Group: Java Developer / ...
£35000 - £38000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...