2016 is going to be a big year for AstraZeneca (LON: AZN) and whatever happens to the rest of the market this year, Astra will exit the year a different company.
You see this is the year Astras been dreading for some time. The companys most successful drug, and one of the most successful drugs of all time, Crestor is set to lose patent protection, putting $6.4bn of revenue at risk. Another of Astras treatments, Seroquel XR is also set to lose patent protection this year putting a further $900m of annual revenue at risk. Past trends have shown that once drugs lose patent protection, generic replacements can siphon off up to 90% of sales over a very short period, which is clearly a significant risk for Astra.
And the pain doesnt stop this year.Around 33% of the $24.5bn in revenue Astra is expected to report for 2015will come from three drugs, for which Astra is set to lose the exclusive manufacturing rights by 2017 at the latest that includesCrestor andSeroquel XR.
Time will tell
To fill the revenue hole left by these drugs, Astras management is pinning its hopes on the groups best-in-class pipeline of opportunities, new drugs such asBrilinta, an anti-clotting drug,Durvalumab, and AZD9291.
City analysts believe that these new blockbuster treatments will produce sales for the group of around $4bn per annum by 2018. Whether or not sales of these new drugs will replace the lost revenue from older treatments remains to be seen. However, sales figures this year should provide some insight as to how quickly generic competitors will siphon off Astras sales. If generics grab market share faster than anticipated, Astra may struggle tohit managements sales target of$45bn by 2023.
First sales
The next 12 months are alsoimportantfor Tern (LSE: TERN), which has spent the last two years putting in place the foundations for growth.
As Tern revealed today, the companys net loss for the year ended 31 December 2015 trebled as admin costs mounted. Still, revenue for the period increased 290% and the groups net asset value almost doubled year-on-year. All in all, the company is moving in the right direction and during 2016 Terns most significant investment,Cryptosoft, should beginto launch its new products after a year of investment.
Indeed, in todays press release issued alongside Terns full-year 2015 results, management announced thatCryptosoft is indiscussions with several global companies with regards to new contracts.The installation ofan experienced VP of Global sales who started in November, along witha new VP of Sales in North America who is due to start in the first quarter of 2016, should only accelerate the adoption ofCryptosofts offering among potential customers.
Overall, Cryptosoft is on track to record its first large sales this year, and when these contracts are signed, Tern will become a much more attractive investment opportunity.
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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has recommended AstraZeneca. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
