It's been pretty hectic of late for AstraZeneca (NYSE: AZN), with good news coming in the form of new partnerships and licensing agreements, but bad news just recently on the patent front. As if that weren't enough, the company is looking ahead both to some serious upcoming generic competition and late-stage pipeline development, suggesting at least the risk that the company will be working hard to stay more or less in place.
It wasn't as if that work was in vain in the fourth quarter at least. Revenue rose 9% in constant currency terms. While I'm not a big fan of using "constant currency" numbers, in this case it makes for more consistent comparisons, so I'll make an exception. Revenue growth was fueled by a range of drugs, including 13% growth for Nexium (the company's largest), 19% for Toprol-XL, 12% for Crestor, and 34% for Seroquel.
Operationally, the company did a good job of controlling costs and making the most of its revenue growth. Gross margins improved more than three and a half full percentage points, and the operating margin was up about four points. Consequently, operating income rose 26% and earnings per share were up 37%.
That's not a bad performance. But the question for AstraZeneca isn't too much different from the question for the likes of Pfizer (NYSE: PFE), Bristol-Myers (NYSE: BMY), and Lilly (NYSE: LLY). Namely, can growth from new products and improved operational efficiency stay ahead of generic competition and allow the company to post decent growth?
AstraZeneca has certainly paid up lately to gain access to promising new drugs, particularly in the case of a deal with AthroGenics (Nasdaq: AGIX). And, of course, there's the company's own late-stage pipeline, including high-potential drugs like Cerovive for stroke, Galida for diabetes, and AZD6140 for anti-platelet therapy.
Based on a recent court ruling, AstraZeneca needs the boost. If this recent patent ruling throwing out AstraZeneca's claim and supporting generic competition from Andrx (Nasdaq: ADRX), KV Pharmaceutical (NYSE: KVa), and Novartis, that would be a sizable blow to earnings and analyst estimates.
So what to do with AstraZeneca's stock? It might not be as cheap as Pfizer or Abbott Labs, but if the pipeline works out, it still seems like there's money to be made here. That's just one Fool's opinion, though, so make sure you do careful due diligence of your own.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
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