AstraZeneca SWOT & PESTLE Analysis
ID : 52398853 | May 2018 | 17 pagesCOMPANY PROFILE - AstraZeneca
Business Sector : Biopharmaceutical and Pharmaceutical
Operating Geography : United Kingdom, Global
About AstraZeneca : AstraZeneca is an Anglo-Swedish global pharmaceutical and biopharmaceutical company with headquarter in Cambridge, United Kingdom. The business is driven and led by science, technology and innovation, providing medicines used by millions of patients worldwide. The company was founded in 1999 by the merger of Swedish Astra AB and the British Zeneca group and has a market cap of $ 90.7 Billion as on April 18, 2018. The product portfolio on the group consists of medicines for curing diseases such as Cancer, Cardio vascular, Respiratory, Neuroscience, Oncology, Infection and Vaccines.
AstraZeneca’s mission as per their website is to “turn ideas into life-changing medicines that improve patients’ lives and benefit society.”
AstraZeneca Revenue :
$ 22.46 Billion (year ending 31 December 2017)
$ 23.00 Billion (year ending 31 December 2016)
Competitive Analysis of AstraZeneca
| 1. Ranked first in innovation index. 2. High percentage of R&D Expenditure amongst the industry leaders. 3. Strong financial performance. | 1. Bad public relations image and other controversies 2. High failure rate for drug leads to high operational losses. 3. Lack of inspirational leadership and other top management concerns. |
| 1. Vast growth opportunities in the emerging markets that can be future drivers for growth. | 1. Acquisition by financially bigger and wealthier companies. 2. Loss of revenue because of generics. 3. High drug development cost. |
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Strength
1. Ranked first in the Innovation Index: In 2018 AstraZeneca topped the Pharmaceutical Innovation Index released by IDEA pharma for the first time leading behind industry leaders such as Johnson&Johnson, Pfizer, Abbot, Novartis, Bayer, Sanofi, Glaxo Smith Kline and many others, AstraZeneca topped the ranking even though they were ranked on the 15th spot in 2017, this comes on the back of some key strategic decisions taken by the management at AstraZeneca that helped to pipeline the positive data and ideas and stem the company’s downward trend because of the loss of several exclusive products between the year 2011 and 2017. AstraZeneca was considerably behind in developing cancer immunotherapy drugs which the market leaders such as Merck, Roche and Bristol-Myers were also competing for but the successful test trials by AstraZeneca could give it a major advantage. The main reason that AstraZeneca topped the Pharmaceutical Innovation Index in 2018 from the 15th position was the launch of five new significant medicines in 2017 primarily across their therapy areas which are no mean feat for a company in the industry.
2. High percentage of R&D Expenditure amongst the industry leaders: In absolute spending on R&D AstraZeneca ranks at the 6th spot overall in the pharmaceutical industry in Financial Year 2017 despite being much smaller in size in terms of revenue than some of its competitors, it outperforms Bristol-Myers Squibb, Sanofi and GlaxoSmithKline all of which have a higher revenue than AstraZeneca, this comes on the back of a decline in revenue in 2017 by more than 2% than that in 2016, but the company showed positive results in the Q4 of FY 2017 where its revenue grew by 3% than that in Q4 of FY 2016. On an average the top ten Pharmaceutical companies by their market capitalization shelled out 17% of their revenues on R&D, whereas AstraZeneca proved to set the benchmark in this aspect as they spent just more than 25% of their revenues, this comes at a time when the total spending on R&D by the top 10 companies combined stood at $ 70 Billion in 2017 which has been stagnant for the past 5 to 6 years as the total spending of $ 70 Billion was spent in 2011 and 2012.
3. Strong Financial performance: AstraZeneca has suffered a big setback since 2012 when their patents on some key pharmaceutical products expired and the exclusivity of those products was lost because of which the company saw a decline of 15% in revenue in 2012 and the sales reduced to half than the year before. The company steadily recovered from this loss through the 6 years and in 2018 AstraZeneca announced that they have returned to sales growth in the Financial Year 2017 Q4; that was largely driven by newly developed cancer treatments, oncology pills (new oncology treatments registered for 98% growth), treatment of lung diseases and a sales growth in emerging market of 6%, China which saw a sales growth of 15% in 2017 and 33% in Q4 of FY17 supported by launch of new medicines. And with the optimistic results in the Q4 FY 2017, the company wants to reach target revenue of $ 45 Billion by the year 2023.
Weakness
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Opportunity
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Threat
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| 1. Uncertainty due to BREXIT. 2. Increased spending on healthcare by governments by providing healthcare programs (as Obama-care and Modi-care) | 1. Steps taken by the Trump Government to lower drug prices. 2. Deteriorating returns on the R&D investment in the pharmaceutical industry. |
| 1. Aging population will lead to greater growth opportunities. 2. Significant growth in the number of patients suffering from diseases caused by urban lifestyle. 3. Rising income levels. | 1. Investing in building innovation centre to promote quality manufacturing 2. Artificial Intelligence and tracking systems to aid in drug discovery and tackling counterfeits |
| 1. Decline in drug approval from the regulatory bodies. 2. Changes made in the corporate tax rate in the USA 3. Impact of GDPR on operation and development of drugs | 1. Leadership role taken by AstraZeneca to tackle the global climate change. |
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Political
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Economic
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Social
1. Aging population will lead to higher growth opportunities: Several developed and developing countries have a high average age of the population which in the coming years will be beneficial for the pharmaceutical industry as more the age the higher the spending gets on healthcare. The revenue earned by the pharmaceutical industry worldwide in 2016 was $1,105 Billion; significant revenue comes from only 4 geographical markets that are the USA, China, Europe and Japan with each contributing $370 Billion, $145 Billion, $188 Billion and $84 Billion respectively. The USA, China and Europe have an average age of population ranging between 36 to 39 years where it is expected that the average age of the population will reach 50 years by the year 2045 and this will give a major boost to the pharmaceutical industry just like Japan’s (average age-47) pharmaceutical market is huge considering the relatively small population of the country when compared to the USA, China and Europe.
2. Significant growth in the number of patients suffering from diseases caused by urban lifestyle: Lifestyle diseases are those diseases caused by how an individual chooses to lead their life some of the common sources that these diseases stem from are smoking, alcohol, tobacco, lack of physical activity etc. Since the start of the 21st century cases of such diseases have manifold. Some of the common lifestyle diseases are atherosclerosis, Alzheimer’s disease, cholesterol issues, obesity, heart disease, lung cancer, and diabetes and lung cancer. Diabetes is the single largest major disease affecting about 420 million worldwide which is roughly 1 in 11 individuals and more than 2.2 Billion people worldwide are reported to be obese. It has been estimated that AstraZeneca will earn revenue of $3.7 Billion from its anti-diabetic drug in the year 2022 up from the 2015 figure of $2.5 Billion in 2015, a jump of more than 48% than that in 2015. Similarly, it has been estimated that more than 220 million people will be suffering from hypertension by 2025 while the figure was less than 120 million in the year 2000. All these factors contribute in a significant manner in increasing the consumption of the drugs which eventually helps the pharmaceutical companies to increase their revenue and sales.
3. Rising income levels: Income levels in the developing world have grown at a very rapid pace since the 1990’s and this has been evident by the amount of money that countries are now spending on their health and wellbeing. China spent 4.7% of their GDP on healthcare in 2004 that amounted to $90 Billion and in 2014 China spent 5.7% of their GDP on healthcare a marginal increase of just 1% point but in absolute figures a total of $590 Billion was spent, this six-fold rise in the spending can be attributed to the rising income levels and growth in GDP. Similarly, India in its last financial budget increased its budget allocation on healthcare by 11%.
Technological
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Legal
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Environmental
1. Leadership role taken by AstraZeneca to tackle the global climate change: AstraZeneca have strived for sustainability for environment and has been a flag bearer to tackle the issue of climate change and they wish to protect the climate and preserve the natural resources through their radical use of technology and strategy employed by them. AstraZeneca is one among the 9% of the organizations to have been certified with CDP (Carbon Disclosure Project) program which supports corporations to disclose their impact of the operations caused on the environment. Also, AstraZeneca plans to source all their energy needs through renewable energy resources at all their facilities worldwide by the year 2025. Beside this AstraZeneca also possess the distinction of being one of the four Financial Times Stock Exchange out of a list of 350 companies to have their mission for trying to halt climate change approved by the Science Based Target Initiative.
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References used in AstraZeneca Analysis Report
1. https://www.astrazeneca.com/content/dam/az/PDF/2017/Full-Year/Full-Year%202017%20Results%20announcement%20.pdf
2. https://www.investorschronicle.co.uk/tips-ideas/2018/02/02/astrazeneca-returns-to-sales-growth/
3. https://www.pharmamanufacturing.com/industrynews/2018/astrazeneca-partners-with-tech-giants-to-reach-china-market/
Copyrights and Disclaimer
AstraZeneca SWOT and PESTLE analysis has been conducted by Deepankar Pandey and reviewed by senior analysts from Barakaat Consulting.
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