Register to get unlimited access to Citywire’s fund manager database. Registration is free and only takes a minute.

AstraZeneca - buy or sell? We ask five experts

After AstraZeneca rejected Pfizer improved bid, we ask five wealth managers whether the UK drugs giant is a decent investment opportunity.

The bid battle at AstraZeneca has dominated the headlines and become a major political issue

Last week US drugs giant Pfizer said it was withdrawing its £55 a share bid, worth £69 billion, after Astra rejected its latest offer.

'Following the AstraZeneca board's rejection of the proposal, Pfizer announces that it does not intend to make an offer,' the firm said in a statement.

The news will delight the likes of Neil Woodford, who believes Astra is worth considerably more. However, BlackRock and Schroders expressed disappointment at the lack of engagement from Astra.

We speak to five wealth managers to assess what they make of the saga.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

The bid battle at AstraZeneca has dominated the headlines and become a major political issue

Last week US drugs giant Pfizer said it was withdrawing its £55 a share bid, worth £69 billion, after Astra rejected its latest offer.

'Following the AstraZeneca board's rejection of the proposal, Pfizer announces that it does not intend to make an offer,' the firm said in a statement.

The news will delight the likes of Neil Woodford, who believes Astra is worth considerably more. However, BlackRock and Schroders expressed disappointment at the lack of engagement from Astra.

We speak to five wealth managers to assess what they make of the saga.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Andrew Morgan, portfolio manager, Walker Cambria, Swansea

‘While Pfizer’s bid would have put AstraZeneca on an enticing forward PE of around 22x, we think the company has done the right thing in turning it down. Leaving aside political concerns surrounding the company’s importance to the British economy, we believe an independent AstraZeneca will deliver better returns for its shareholders in the long term.

‘In the past, AstraZeneca has been viewed as losing its way – possibly fairly. Yet under CEO Pascal Soriot the company has been making major progress in refocusing on its key strengths – scrapping share buybacks, cutting costs, targeting key markets and rebuilding its pipeline.

‘Yet there is no escaping the fact that, for investors, the turnaround in AstraZeneca’s pipeline is a waiting game, during which time earnings and sales are set to fall. While we think rejecting the bid gives AstraZeneca the possibility of long-term success as a standalone company, a significant amount of the success from the current pipeline is already priced in.’

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Peter Lowman, CIO, Investment Quorum, London

‘Clearly, the recent Pfizer bid for AstraZeneca has seen some of its largest shareholders become fairly vocal on the transaction and subsequent pressure on the AstraZeneca board.

‘Indeed, the British drugs giant has thwarted the American companies final bid of £55per share which all but guarantees its independence. Many differing comments have come out of the numerous leading investment institutions, particularly the larger shareholders. Undeniably, some believe that the AstraZeneca board acted too hastily rejecting the bids, and that the government were too out spoken on the question of restructuring and possible job losses.

‘Whilst the shares yield 4.5% and are on a P/E of just under 17x, much in line with the pharma sector, it begs the question can the shares go any lower? Certainly, however, it must be said that the apparent comments from the companies advisers, Morgan Stanley, Goldman Sachs, and boutique firm Robey Warshaw that Astra might be willing to consider a bid, on or above, £58.85 per share is intriguing.’

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Charlotte Watson, chief investment officer, Attivo Cheltenham

‘We remain holders of AstraZeneca following the firm’s rejection of the Pfizer bid, as we still see great value for shareholders in the longer term. The company is in a very different position compared to two years ago when Pascal Soriot took the helm and it now has the strength to assert its independence. The research pipeline has been significantly increased which is key to any pharmaceutical company, bringing it back into line with its European competitors. AstraZeneca aims to launch 10 new medicines by 2020. Revenues will decrease in the short term due to the patent protection expiry in both Nexium and Crestor but we feel this is already priced in. The firm has aggressive targets in terms of increasing revenues, expecting by 2017 to be back at last year’s figure with then further increases year on year.

‘The Pfizer deal was on the table mainly due to tax reasons and therefore would perhaps not have been the best partner for AstraZeneca. The US firm was trying to avoid a multimillion dollar tax bill and going forward the ability to gain from UKs corporate tax rate of 20% rather than the 40% in the United States.’

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Stephen Walker, head of equities research and market strategy, Ashcourt Rowan, London

‘We recommended the sale of AstraZeneca a little over a year ago and recent events surrounding the potential acquisition by Pfizer do nothing to persuade us the decision was wrong. Our logic for exiting was based around the fairly well understood story of a heavily compromised core business and an unwillingness to attach significant optimism to a relatively early stage drug pipeline; the sharp divergence of views on the stock is largely a function of expectations for that pipeline. Analyst price targets prior to the Pfizer approach ranged from £27 up to £46, an unusually large range for such a major company.’

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Ed Fetherston-Dilke, investment manager, Arbuthnot Latham, London

‘Following AstraZeneca’s blunt rejection of Pfizer’s fourth offer, valuing it at £55 per share, or £69 billion, shareholders understandably sold down positions as chances of a deal diminished. Despite falling 12% on the news, the shares have performed well in 2014 and are still up 17.5% in the year to 19 May compared to a FTSE 100 return of 1% over the same period. With Pfizer now prohibited from making further overtures as part of UK takeover legislation, and at nearly 17x next year’s earnings we believe the shares are overvalued compared to industry peers. ‘

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Brewin's Gutteridge: Yuan direction

Brewin's Gutteridge: Yuan direction

This week Brewin Dolphin's research head chats to Fidelity Asian Investment Directors Jenny Lee and Gary Monaghan about the big changes in China.

Play On the Road Challenge: horsing around on the polo pitch

On the Road Challenge: horsing around on the polo pitch

Libby Ashby takes to the polo pitch with Stuart Leigh-Davies from Redmayne-Bentley for an 'On the Road' challenge.

Brewin's Gutteridge: where Miton's Godber sees value

Brewin's Gutteridge: where Miton's Godber sees value

This week Brewin Dolphin's research head talks to George Godber, co-lead fund manager of the Miton UK Value Opportunities fund, about value investing.

Your Business: Cover Star Club

Profile: what tempted Brewin's Glasgow team over to Rathbones?

Profile: what tempted Brewin's Glasgow team over to Rathbones?

Rathbones’ Glasgow office has only been open for three months but the team, led by Angus Kerr, has already attracted new clients

Wealth Manager on Twitter