Respected fund manager Neil Woodford has come out to praise the potential ofAstraZeneca(LSE: AZN) (NYSE: AZN.US) this morning, after the company updated investors on its progress over the past few months.
Neil Woodford commented that Astras prospects as an independent company were, even stronger as a result of the firms strong pipeline of new products. And its fair to say that Astras pipeline has really come a long way sinceUS peerPfizermade a bid for the UK drugs maker earlier this year.
For example, Astrahas developed an industry-leading immuno-oncology portfolio with 13 clinicaltrials already underway and a further 16 planned. Whats more, in total the group has 14 potential new drugs already in the process of Phase III testing or registration before sale. Theres potential for another 14 to 16 drug submissions in addition to the current Phase III pipeline and eighttotenapprovals are set for 2016.
Thats a solid pipeline of treatments under development, with plenty of potential to kick-start growth.
Management believes that as a result of these pipeline developments, Astra is ontrack to return to growth by 2017. Moreover, Astra believes that its target todelivering revenues of over $45bn by 2023 is achievable, based on the companys current position. However, Woodford is not so sure and still believes that reaching this lofty target will betough.
Nevertheless, Woodford does feel that Astrasattractive future could well underpin a fresh bid approach from Pfizer, or another suitor. The star fund manager puts the chance of another bid at 50/50.
When Pfizer announced its offer for Astra earlier this year, Woodford did not lend his support to the deal as he believed, that over time, Astra could achieve a far better return for itsshareholders than the offer from Pfizer could have delivered. The fund manager reiterated this view today and its hard to disagree with him.
While Astras shareholders would have receiveda one-off cash payment if the company had accepted Pfizers offer, over the long-term, Pfizer would have cut costs at the company and neglected research and development spending, in order to justify the merger price.
As an independent entity looking for growth, Astra is spending heavily on R&D, which is showing through in the companys pipeline of treatments underdevelopment and should fuel earnings growth over the long-term.
Moreover, Astra is putting shareholders first, with itscommitment to safeguard the dividend and hike the payout in line with earnings. Indeed, under the Azip executive compensations plan, which I have coveredhere, if Astras dividend payout is cut, management stands to lose millions in share awards.
So, Astra’s dividend yield of 3.9% is safe, making the company the perfect income investment.Dependable dividends are not easy to find, there are plenty of companies out there that have cut their payouts at a moment’s notice.
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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.