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Why AstraZeneca’s Respiratory Segment Is a Key Growth Platform

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Respiratory segment

AstraZeneca’s (AZN) Respiratory segment, one of the company’s growth platforms, is a key focus area of development. The segment’s contribution was 19.5% of total revenues in 3Q16, and its key products are Symbicort and Pulmicort. Newly added products include Tudorza, Eklira, and Duaklir.

To strengthen the portfolio, AstraZeneca acquired Almirall’s respiratory business and an inhalation device subsidiary in November 2014, in addition to Allergan’s (formerly Actavis) branded respiratory portfolio for the US and Canada in 2015.

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Symbicort

Symbicort, another blockbuster from AstraZeneca, is a respiratory drug used to prevent bronchospasms in patients suffering from severe asthma or chronic obstructive pulmonary disease. Symbicort’s revenues fell 17% (at constant exchange rates) to $697 million in 3Q16, following lower demand due to increased competition from recently launched analog medicines in European markets and pricing pressure from competition.

Symbicort has competitor drugs like Advair from GlaxoSmithKline (GSK), Spiriva by Boehringer Ingelheim, Foradil from Merck (MRK), and Brovana from Sunovion Pharmaceuticals.

Pulmicort

Pulmicort is a respiratory drug used to prevent asthma attacks. Pulmicort’s revenues rose 4% at constant exchange rates to $224 million in 3Q16, following the growth in emerging markets and China. Both Symbicort and Pulmicort have a growing demand across emerging markets including China.

Eklira and Duaklir were added to AstraZeneca’s portfolio as a result of the AstraZeneca-Almirall deal, while Tudorza and Daliresp were acquired from Allergan (AGN) (formerly Actavis). The performance of these drugs is in line with the expectations of the company.

To divest risk, investors can consider ETFs like the VanEck Vectors Pharmaceutical ETF (PPH), which has ~4.6% of its total assets in AstraZeneca.

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