AstraZeneca: Where Has All the Cash Gone?

[PinkDalek]

I sold 2/3 of my AZN a few months ago, will be offloading the rest of them today.

I've been concerned about the cash flow for a while (and with GSK), and I suspect a dividend rebase will happen within the next 2 years.

I've made a good return on AZN, but not it's time to move the money to something off topic and getting better diversification and yield at the same time.

Do, please, do a post on a board where your new purchase would be on-topic and let us know where that is. I'd be interested to know what you are planning to buy.

The answer might be in Darka's Topic over at High Yield Shares & Strategies - general:

Darka's Income Portfolio and AZN
viewtopic.php?p=227749#p227749

[Darka]

Thanks PinkDalek,

I was going to link to my other post, but didn't get time to do it and then forgot.

regards,
Darka

[Bouleversee]

Do, please, do a post on a board where your new purchase would be on-topic and let us know where that is. I'd be interested to know what you are planning to buy.

You were not asking me but the problem as I see it is exactly what you allude to - I cannot honestly answer your question without going off topic for this board.

But the reason for that may be on topic for this board, i.e. that the usual suspect HY shares that have sustained this community for a decade or two are failing their constituents. I have watched whilst first financials, then retail, then support services, utilities and tobacco, now pharma and other HY sectors have serially disappointed.

I looked at my account today where I hold HY-like shares and the only real winners in capital terms were Diageo and Unilever, and a few others like Compass and Smith & Nephew. Almost every other share has, despite spitting out some self-disgorging dividends, evaporated capital.

So yes, I offloaded Glaxo and Astra recently. But I dumped the proceeds into a S&P 500 index fund, where at least I might find some growth. If HY investing had run its course, how would anyone here know?

Funnily enough, my daughter emailed me yesterday to ask if I had heard that Warren Buffet had written to his wife suggesting that if he died she should put all her money into the S&P 500 index fund (not sure I'd want to do precisely that) but I see that there is a long thread on Darka's p/fs etc. on High Yield Shares and Strategies (which I haven't yet had time to read but will) so further discussion should be on there.

As regards AZN, there was an article in today's Times saying that the costs of their new "glass doughnut" global headquarters in Cambridge have more than doubled to £750m. As may already have been mentioned on here, that is presumably where a lot of the cash has gone and will do nothing to boost future returns.

[monabri]

Warren Buffet had written to his wife suggesting that if he died she should put all her money into the S&P 500 index fund (not sure I'd want to do precisely that)

Fine for Mrs WB as she wouldn't need to worry about exchange rate risk unlike us Brits on this side of the pond. What happens to investments in iShares/Vanguard if (if) Sterling recovers and Brexit goes better than expected? (maybe VG investments ARE safe then ! )

As regards AZN, there was an article in today's Times saying that the costs of their new "glass doughnut" global headquarters in Cambridge have more than doubled to £750m. As may already have been mentioned on here, that is presumably where a lot of the cash has gone and will do nothing to boost future returns.

Wouldn't the cost be on the contractor building the HQ - Carillion#2?


I don't hold AZN shares and am not tempted to buy as the yield is unattractive but mainly for the reasons mentioned above by other posters. They are trading on a high PE - if they fail to deliver on their drugs pipeline then I guess it'll not be nice share-price wise nor for the dividend. I was surprised when the share price of a top tier blue chip company fell so much on the failure of just one drug trial (Mystic - July 17, share price fell to sub £43 from £51).

[TUK020]

Fine for Mrs WB as she wouldn't need to worry about exchange rate risk unlike us Brits on this side of the pond.

I've got a sneaky feeling that Mrs WB doesn't need to worry about money at all

[Bouleversee]

Monabri said:

"Bouleversee wrote:
As regards AZN, there was an article in today's Times saying that the costs of their new "glass doughnut" global headquarters in Cambridge have more than doubled to £750m. As may already have been mentioned on here, that is presumably where a lot of the cash has gone and will do nothing to boost future returns.


Wouldn't the cost be on the contractor building the HQ - Carillion#2?"

Apparently not. The article is headed: "Astrazeneca is swallowing the soaring cost of 'glass doughnut' " and says that Mace (the replacement construction manager who is overseeing the fit-out of the laboratories and offices) is reviewing cost estimates, but the present projection is in the region of £750m. "The review raises the prospect that the cost, funded out of operational cashflows, could rise further". So it's not clear from this how much of the costs have been included in accounts to date and how much of the £750m (plus?) is still to come.

[monabri]

What a pity CLLN or Irv didn't get THAT contract!

[HYPMonkey]

Minded to sell AZN on cancer drug news.

[Bouleversee]

Minded to sell AZN on cancer drug news.

What cancer drug news?

[Itsallaguess]

Minded to sell AZN on cancer drug news.

What cancer drug news?

Presumably this RNS released earlier this morning -

AstraZeneca and MSD Inc., Kenilworth, N.J., US (MSD: known as Merck & Co., Inc. inside the US and Canada) today announced that the European Commission (EC) has approved Lynparza (olaparib) as a 1st-line maintenance treatment for women with BRCA-mutated advanced ovarian cancer.

60% of patients receiving Lynparza remained free of disease progression after three years vs. 27% on placebo in pivotal Phase III SOLO-1 trial

AstraZeneca and MSD's Lynparza is the only PARP inhibitor approved in the EU for this indication

https://www.investegate.co.uk/astrazeneca-plc--azn-/rns/lynparza-approved-in-the-eu-for-1st-line/201906180700125405C/

Cheers,

Itsallaguess

[Bouleversee]

Thanks; I missed that as I have a house guest. So is this where I go wrong? My instinct would be to hang on to a success story but should I be quitting while I am ahead? Having said that, I admit to hanging on to my losers as well in the hope of recovery (e.g. WPCT), which rarely works though Greggs is a fortunate exception.

[tjh290633]

Thanks; I missed that as I have a house guest. So is this where I go wrong? My instinct would be to hang on to a success story but should I be quitting while I am ahead? Having said that, I admit to hanging on to my losers as well in the hope of recovery (e.g. WPCT), which rarely works though Greggs is a fortunate exception.

Lorna, I hang onto them until they get too big for their boots and then cut them down a bit. Call it judicious pruning.

Originally the limit was 10% of portfolio value, which is when I trimmed back Zeneca in 1997 at £18.55. Since then I moved onto the percentage of median holding value, first at 200% and now at 150%. I've trimmed 3 more times, in 2008 at £24, in 2014 at £46.75 and recently last November at £62.50. I've also topped up a few times when they have been a suitable candidate. The IRR of my cash flow is about 15.9%.

TJH

[Gengulphus]

Minded to sell AZN on cancer drug news.

What cancer drug news?

Presumably this RNS released earlier this morning -

AstraZeneca and MSD Inc., Kenilworth, N.J., US (MSD: known as Merck & Co., Inc. inside the US and Canada) today announced that the European Commission (EC) has approved Lynparza (olaparib) as a 1st-line maintenance treatment for women with BRCA-mutated advanced ovarian cancer.

Does anyone here have any idea how common "BRCA-mutated advanced ovarian cancer" is, and among women who suffer from it, how common it is to try to treat it by "1st-line maintenance treatment"? It makes a tremendous difference to the significance of this news, and I for one have no idea about the answers or how to obtain reasonably authoritative answers... And actually, that form of the qualifications seems to be the simplified version - if one reads on in the RNS, one finds that "The licensed indication is as a maintenance treatment of adult patients with advanced (FIGO stages III and IV) BRCA1/2-mutated (germline and/or somatic) high-grade epithelial ovarian, fallopian tube or primary peritoneal cancer who are in response (complete or partial) following completion of 1st-line platinum-based chemotherapy."...

Just to be clear, I am not asking how common ovarian cancer is or whether it's a significant medical problem - I'm certain it is, both for those affected by it personally and for the NHS and other health care funding. What I am asking is whether the qualifying words "BRCA-mutated" and "advanced" and the extra qualification about the type of treatment mean that the newly-approved drug is likely to make major inroads into that problem or just nibble at its edges - which clearly makes a big difference to how major an impact it will have on AstraZeneca's fortunes.

This is in general the problem I have as a HYP investor with trying to take account of such announcements from the pharmaceuticals companies: there are quite a lot of them, and judging the significance of each to the company's fortunes would be a non-trivial chunk of work for me. E.g. there are another three today, including one for the same drug in Japan rather than Europe that has significantly different wording, so that I would need more time than I have available right now to judge whether it deals with essentially the same part of the ovarian cancer problem and if not, whether it's a significantly larger chunk of it, a significantly smaller chunk, or a different but similarly-sized chunk... Trying to track how well the company is doing by analysing such announcements could easily become a full-time job or a major fraction of one - for just one of the companies in my HYP! For me, that's not a practical way to achieve my HYP's aims, which include not consuming a large fraction of my available time (because I have plenty of other, more interesting uses for it...).

Gengulphus

[Bouleversee]

Geng -

Like you, I don't know how to differentiate types of ovarian cancer but I do know that ovarian cancer is reasonably common and tends to be diagnosed late because symptoms are not obvious in early stages and for that reason the survival rate is very poor, which is why my instinctive reaction was that this would be profitable for AZN following what looks like a pretty good trial result. AZN are also collaborating with Horizon Discovery who are into gene editing and modification which I think will be the way forward for lots of cancers, so I am finding it difficult to persuade myself to part with them, especially if the costs of the new building have already been allowed for as they were a worry. As I have rather a ridiculous number of holdings, there is no danger of this (or indeed any) holding becoming overweight. If only!

[Bouleversee]

P.S. to previous post:

I wasn't able to copy the text for some reason, but this link may help to assess the importance of this announcement:

https://www.bing.com/search?q=brca+muta ... lang=en-GB

[Itsallaguess]

Trying to track how well the company is doing by analysing such [RNS] announcements could easily become a full-time job or a major fraction of one - for just one of the companies in my HYP!

For me, that's not a practical way to achieve my HYP's aims, which include not consuming a large fraction of my available time (because I have plenty of other, more interesting uses for it...).

Totally agree.....and I wouldn't have normally linked to such an RNS announcement if there wasn't a direct question regarding it....

As an aside, I continue to think that this is one of the huge discrepancies between what's supposed to be promoted as a HYP Strategy that is 'fire and forget' to a large degree, but then seems to require constant monitoring of day-to-day RNS releases, whilst at the same time, proponents of such news-gathering are very often heard to take a view that 'we should let management get on with running the company', when actually discussing such news-detail...

Well, I'd have to ask, which is it?

Cheers,

Itsallaguess

[Julian]

...
Does anyone here have any idea how common "BRCA-mutated advanced ovarian cancer" is, and among women who suffer from it, how common it is to try to treat it by "1st-line maintenance treatment"? It makes a tremendous difference to the significance of this news, and I for one have no idea about the answers or how to obtain reasonably authoritative answers...
...
This is in general the problem I have as a HYP investor with trying to take account of such announcements from the pharmaceuticals companies: there are quite a lot of them, and judging the significance of each to the company's fortunes would be a non-trivial chunk of work for me. E.g. there are another three today, including one for the same drug in Japan rather than Europe that has significantly different wording, so that I would need more time than I have available right now to judge whether it deals with essentially the same part of the ovarian cancer problem and if not, whether it's a significantly larger chunk of it, a significantly smaller chunk, or a different but similarly-sized chunk... Trying to track how well the company is doing by analysing such announcements could easily become a full-time job or a major fraction of one - for just one of the companies in my HYP! For me, that's not a practical way to achieve my HYP's aims, which include not consuming a large fraction of my available time (because I have plenty of other, more interesting uses for it...).

Gengulphus

I agree. I'm maybe in a better position than most because I have good access to a significant amount of pharmaceutical expertise from various medics and pharmacologists, all at senior levels with 30+ and in some cases 40+ years of industry experience (including one working at AZN but unfortunately oncology is not one of her therapeutic areas). My access to all of this deep expertise however only makes me realise even more how totally at sea I am in terms of evaluating such announcements. You mention only the most obvious missing bits of info needed to assess the impact of this announcement on your investment, my exposure to decades-worth of industry gossip at parties, in pubs, on holidays and around dinner tables makes me realise how many other factors there are at play when trying to evaluate the significance of such announcements. Others include (in principle, not necessarily all in this specific case) - What else if anything is already on the market or in trials at the moment that might come to market soon? What are the pricing properties (typical price points and frequency/duration of treatment) for drugs for this indication? For the UK how will AZN's proposed pricing fit with NICE's quality-adjusted years of life cost assessment? How many years are left before patent expiry, e.g. was any time on the clock run down due to problems with earlier trials or was it kept on the shelf for a while before funding for late-stage trials was allocated? (On this one I did actually see that there were previous less successful trials that once retrospectively analysed specifically for the BRCA mutations caused the drug to be revisited so that presumably has run down the patent clock somewhat.) What contraindications if any might there be? And the list goes on.

On a purely personal level I still find these announcements interesting but that is only because they almost always highlight things that I still don't understand about the industry hence give me one or more specific questions to ask my panel of expert friends to fill in gaps in my understanding. If I didn't live sort of on the edge of the pharma industry though I'm not sure what I would get out of them. (E.g. on this one I thought I understood how ethics committees influenced/changed procedures for oncology trials but the use of the placebo has me slightly confused so I will definitely be asking some of my friends about that aspect of this announcement.)

- Julian

[Bouleversee]

I had to laugh when I read the following in ADVFN's morning bulletin:

"AstraZeneca ticked down even as the pharmaceuticals giant said it had secured three new drug approvals in Japan", but "On the upside, housebuilder Berkeley Group was on the front foot. Although it posted a 20.7% decline in full-year pre-tax profits to £775.2m, this was still at the top end of market expectations."

[Bubblesofearth]

I had to laugh when I read the following in ADVFN's morning bulletin:

"AstraZeneca ticked down even as the pharmaceuticals giant said it had secured three new drug approvals in Japan", but "On the upside, housebuilder Berkeley Group was on the front foot. Although it posted a 20.7% decline in full-year pre-tax profits to £775.2m, this was still at the top end of market expectations."

And, as AZN are up over £67 this morning, I have to laugh rereading this thread and reminding myself how futile any attempt at company analysis is by us mere mortals on here.

I've held AZN for many years and, whilst never tempted to sell, do read these threads as both a diversion and as a reminder of how badly wrong most of are most of the time when trying to be a bit too clever!

BoE

[Bouleversee]

I had to laugh when I read the following in ADVFN's morning bulletin:

"AstraZeneca ticked down even as the pharmaceuticals giant said it had secured three new drug approvals in Japan", but "On the upside, housebuilder Berkeley Group was on the front foot. Although it posted a 20.7% decline in full-year pre-tax profits to £775.2m, this was still at the top end of market expectations."

And, as AZN are up over £67 this morning, I have to laugh rereading this thread and reminding myself how futile any attempt at company analysis is by us mere mortals on here.

I've held AZN for many years and, whilst never tempted to sell, do read these threads as both a diversion and as a reminder of how badly wrong most of are most of the time when trying to be a bit too clever!

BoE

You really did have me bubbling, Bubbles, but it seems you left out a little word ("to"). However, even a rise of over £4 is very acceptable (6.75%) and I'm glad I didn't sell.