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AstraZeneca PLC ADR AZN Stock Quote

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Morningstar‘s Stock Analysis AZN

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Diving Into the Drug Pricing Hit From the Inflation Reduction Act, We’ve Reduced Our FVEs by 2%

Karen Andersen, CFA Sector Strategist

Analyst Note

| Karen Andersen, CFA |

After taking a closer look at what we consider the three key elements of the Inflation Reduction Act that will affect the biopharma industry over the next decade, we're reducing our fair value estimates for 17 of the biggest biopharma names in Morningstar's coverage by an average of 2%. We think the step-down in U.S. branded drug sales from capping Medicare price increases to inflation (fully rolled out in 2023), redesigning Medicare Part D (beginning in 2025), and Medicare negotiation (beginning in 2026 for small molecules) will result in a 3% reduction in total sales for these firms by 2031, with firm-level reductions depending on the firm's reliance on the U.S. market, proportion of the portfolio targeting seniors, history of price increases, and relative size of its small molecule and biologics portfolios (as biologics are immune from Medicare negotiation for 13 years instead of nine). Our estimates factor in some ability for the industry to either benefit from certain changes (like potential increased prescription fill rates in Part D with lower out-of-pocket costs) or compensate for headwinds (like responding to inflation caps on price increases with higher launch prices). Overall, we think the effect of the Inflation Reduction Act is manageable for the industry, and we see the competitive advantages and economic moats of these firms remaining intact. 

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Key Statistics AZN

Company Profile AZN

Business Description

A merger between Astra of Sweden and Zeneca Group of the United Kingdom formed AstraZeneca in 1999. The firm sells branded drugs across several major therapeutic classes, including gastrointestinal, diabetes, cardiovascular, respiratory, cancer, and immunology. The majority of sales come from international markets with the United States representing close to one third of its sales.

Contact
1 Francis Crick Avenue, Cambridge Biomedical Campus
Cambridge, CB2 0AA, United Kingdom
T +44 2037495000
Industry Drug Manufacturers - General
Most Recent Earnings Jun 30, 2022
Fiscal Year End Dec 31, 2022
Employees 83,100

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