AstraZeneca (NYSE:AZN) has been backed in to a corner, but it looks as though the drug maker is ready to come out swinging. The company's stock price has gone nowhere over the last 10 years and it is set to face an onslaught of competition from generics in the coming years. However, a new CEO could give AstraZeneca the spark that it needs.

Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.

Up Against the Clock
Last week the company named its CFO as its interim CEO following the resignation of David Brennan who had faced a growing amount of criticism from investors. The role will not be an easy one to fill in the wake of demands from analysts and investors who are calling for the company to do deals larger than those that were transacted on Brennan's watch.

One of the greatest challenges facing AstraZeneca in the intermediate term is the expiration of patents on some of its biggest selling drugs. Nexium, which accounted for around 13% of the company's product revenue last year, is set to lose its patent protection in the United States in 2014. The company has already seen sales of the drug in Western Europe plummet due to generic competition.

AstraZeneca will have patent protection until late 2016 on its Seroquel XR. However, protection for its Seroquel IR formulation has already expired. XR accounted for roughly 12.9% of the company's product revenue in 2012 while IR comprised only about 4.4%.

SEE: Evaluating Pharmaceutical Companies

Looking Ahead
Now AstraZeneca is charged with hiring a CEO with thick skin who is either capable of pulling off a major acquisition or communicating the wisdom to the market on why smaller-sized deals make sense for the drug maker's long-term growth. Both challenges will be daunting, but can be overcome. AstraZeneca has been proactive in seeking out partnerships in the biotech space to develop new drug candidates as evidenced by its recent agreement with Amgen (Nasdaq:AMGN). It also has about $7.6 billion in cash at its disposal.

It may be too early to speculate on possible deals that could materialize down the road after a permanent CEO is hired, but analysts have already thrown out some ideas. Forest Laboratories (NYSE:FRX) and Amylin Pharmaceuticals (Nasdaq:AMLN) are two possible candidates. It has been reported by Reuters that Amylin has already begun the process of seeking out suitors.

The Bottom Line
It has been a very tough landscape for the major pharmaceutical companies as generics have become more commonplace and new drug approvals from the FDA have not gotten any easier. AstraZeneca faces these same challenges, but it has the opportunity to do something big when it brings in a new CEO. Whether the company decides to make a major acquisition or a series of smaller deals, it is going to need to remain aggressive if it wants to remain a major force among the top drug makers.

SEE: Analyzing An Acquisition Announcement

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Billy Fisher did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  2. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  3. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  4. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  5. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  6. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  7. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
  8. Mutual Funds & ETFs

    ETF Analysis: Vanguard Mid-Cap Value

    Take an in-depth look at the Vanguard Mid-Cap Value ETF, one of the largest and most popular mid-cap funds in the U.S. equity space.
  9. Mutual Funds & ETFs

    ETF Analysis: Schwab US Broad Market

    Take an in-depth look at the Schwab U.S. Broad Market ETF, an incredibly low-cost fund based on a wide selection of the U.S. equity market.
  10. Professionals

    Tips for Helping Clients Though Market Corrections

    When the stock market sees a steep drop, clients are bound to get anxious. Here are some tips for talking them off the ledge.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  3. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  4. PT (Perseroan Terbatas)

    An acronym for Perseroan Terbatas, which is Limited Liability ...
  5. Ltd. (Limited)

    An abbreviation of "limited," Ltd. is a suffix that ...
  6. BHD (Berhad)

    The suffix Bhd. is an abbreviation of a Malay word "berhad," ...
RELATED FAQS
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  4. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  5. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
  6. What happens to the shares of stock purchased in a tender offer?

    The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!