AstraZeneca(NASDAQ: AZN) is embarking on a fresh business plan that will see it grow significantly between now and 2030. If it succeeds, it'll be a company that's even more prominent in the global biopharma sector, and its investors could potentially be wealthier too.
But that doesn't make it the right choice for everyone, so it's important to dive into the details of exactly what it's setting out to do. Let's start by putting this plan into context relative to where the business is today.
This new plan is very ambitious
In 2023, the biopharmaceutical brought in $45.8 billion in revenue. And it has 182 therapies in its pipeline, many of which are devoted to expanding the approved indications for products already on the market. More than 120 of its programs in oncology, rare disease, and biologics are in mid- to late-stage clinical trials; its pipeline is gargantuan, and also mature overall.
But rather than just continue to advance the existing set of pipeline programs and add to them at the current pace, management has set an even bigger ambition of nearly doubling the top line to at least $80 billion by 2030.
Over this period, the company intends to launch 20 new medicines, a number of which supposedly have the potential to earn more than $5 billion in sales per year at their peak, meaning they would be blockbuster drugs. And as its last major strategic plan from 2013 was completed in 2023, with a revenue target of $45 billion, AstraZeneca likely has the organizational positioning, consistency, and leadership quality to succeed this time around as well.
To serve its goal, the company is investing $1.5 billion to construct a specialized manufacturing facility in Singapore dedicated to making antibody-drug conjugates (ADCs). This category of medicines will likely see significant pipeline investment over the coming years. Currently, AstraZeneca has six ADC programs in clinical trials, so continuing to expand its overall manufacturing capacity will be necessary. The facility is expected to be operational before 2029, and its output will be key to sustaining the company's ability to serve demand for its new complex medicines.
Management is also keen to expand research and development (R&D), as well as manufacturing activities in China.
Buying up or investing in Chinese biotechs will likely continue to be part of the strategy to bolster AstraZeneca's clinical pipeline and its library of pharmaceutical assets for future development. And with more than $8 billion in cash, equivalents, and short-term investments, as well as trailing-12-month (TTM) free cash flow (FCF) of $5.8 billion, the company has more than enough capital to hunt for attractive acquisitions and business development deals in China or elsewhere.
But is the stock a buy?
If AstraZeneca executes its plan as envisioned, management expects to see industry-leading growth. At the same time, it plans to continue to pay out a dividend, or perhaps even increase it as the amount of enduring excess capital allows. That could make AstraZeneca an appealing stock to hold, though its forward dividend yield of 1.8% is average at best.
Over the last 10 years, in keeping with the pace set by the prior strategic plan, its annual revenue cumulatively rose by 72.5%. The current strategic plan requires annual revenue to grow by around 75% in a little over six years. Therefore, the tempo of new product launches will possibly need to be a bit faster this time around, which should be manageable because the company is larger and even more experienced than before.
Overall, the risk of making an investment in AstraZeneca right now does not appear to be high. Given the size of its business, even failures in its most-watched clinical trials will likely only be a bump in the road as far as shareholders are concerned. With that said, despite AstraZeneca's highly ambitious plan for the coming years, it's almost a certainty that smaller biopharma companies will grow faster.
So if you're looking for a growth stock or a bargain play, look elsewhere. But if you're interested in a blue chip stock with big plans, it's a good option to invest in.
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Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool recommends AstraZeneca Plc. The Motley Fool has a disclosure policy.
