AstraZeneca (AZN) #1 [9]

AstraZeneca (AZN) engages in the research, development,
manufacture, and marketing of prescription pharmaceuticals, as
well as the supply of healthcare services worldwide. It
provides medicines designed to fight disease in areas of
medical need, such as cancer, cardiovascular, gastrointestinal,
infection, neuroscience, and respiratory. The company recently
received FDA approval for Arimidex to be used in breast cancer
treatment.

Perhaps the strongest of all AstraZeneca drugs is Seroquel (for
schizophrenia). Seroquel continues to gain market share against
its chief competition Zyprexa (Eli Lilly), Risperdal (Johnson &
Johnson), and Geodon (Pfizer). The U.S. Food & Drug
Administration (FDA) approval the drug last year for bipolar I
disorder (recurring episodes of mania and depression), and an
increased dosing cycle approval to a 12-week regimen. We are
optimistic on future trends for Seroquel throughout 2005. The
company will likely ring up total sales of nearly $2.7 billion
in 2005, growing to over $4 billion in 2008.

Recent second quarter 2005 earnings were far above expectations.
The company posted upside of nearly $250 million in revenues.
Strong products such as Seroquel (schizophrenia), Arimidex
(breast cancer), Casodex (prostate cancer), Symbicort
(asthma/COPD), and Crestor (cholesterol) all outpaced consensus
forecasts. The company raised earnings guidance for the full
year to $2.75, well above the previous range of $2.35 - 2.50.
We see continued upside from strong drug sales flowing into the
third and fourth quarter.

AZN's valuation is attractive given the superior growth rate.
We see AstraZeneca being able to deliver a four year CAGR of
16.4%, significantly above that of all other large-cap
pharmaceuticals (ex. Schering-Plough). Strong bottom-line
growth is driven by a combination of growing revenues,
moderating operational costs and aggressive share buybacks. The
stock currently trades at 17.4x 2005 EPS.

The company is also working on reducing costs to drive
profitability beyond 2005. AZN should continue to see selling,
general and administrative (SG&A) costs decline as a percent of
total revenue for the next several years. Additionally, gross
margins should continue to expand, given the ramp in key
blockbuster products. Share buy-backs are also a significant
driver of the bottom-line. The company has $3 billion in buy-
backs authorized for the next year.

All of these factors contribute to AstraZeneca's earnings
momentum. The company has surpassed expectations for five
consecutive quarters. It's Zacks #1 Rank not only reflects the
most recent positive earnings surprise, but also the sustained
increased in earnings estimates. Analysts have raised their
full year forecasts by 9% over the past 60 days, with the
consensus estimate most recently being revised upwards by two
cents over the past seven days to $2.68 per share.