Mike van Dulken, Head of Research at Accendo Markets, commented:

AstraZeneca (AZN) shares are today registering their first bounce in 7 days as investors react to the positive news that the pharmaceutical giant has increased FY 2012 earnings guidance from $6.00 to $6.30 per share. This comes on the back of the group announcing a useful pact with US competitor Pfizer (PFE) for the latter to have exclusive global rights to market the blockbuster Nexium, AZN’s drug for regulation of stomach acid to treat heartburn, when it is approved for over-the-counter (OTC, non-prescription) use. This may come in late 2013 in the US, with an application pending for Europe. AZN is to receive $25m upfront (accounting for $0.16 of the full-year 2012 guidance increase), as well as potential milestones and royalties depending on future product launches and sales. Pfizer hopes to begin selling the OTC version in the US in 2014 (when AZN’s patent on the drug expires, 14 years after launch), before expanding to other markets. A strategic partnership which could involve similar deals on other AZN prescription drugs which could be sold OTC is a also a positive for the shares, with the company battling with cost cutting and patent expiries of some of its best–selling drugs. Note that Nexium accounted for an not insignificant 83% of AZN’s Q2 2012 gastrointestinal revenues and 14% of group Q2 revenues

Having rallied 19% from June lows of 2600p, the shares encountered resistance et October and Jan highs of 3100p. Nonetheless today’s announcement coincides with a bounce off a resistance-turned-support trendline at 3000p over falling highs from September 10. Recent weakness also appears to be a another pause for breath (similar to that seen in in late July) before the uptrend continues. Upside potential to 3200p May 11 highs, then 3400p Sept 10 highs. Support available at 3000p then 2900p

Shares currently trading at 3016p, +22p/+0.75%

Accendo Markets does not have a rating or target price AstraZeneca