The UK’s second largest drug-maker AstraZeneca (AZN) is among the FTSE 100's biggest fallers as it hints that a strong pound will hit earnings growth this year. Contained in a third quarter trading update, investors have been left unimpressed, leaving the shares nursing a 2.6% fall hangover at £44.98.

The £56.7 billion Anglo-Swedish company  posted an underlying 5% sales increase to $6.5 billion in the three months to end September. This was mainly driven by high demand for ulcer treatment Nexium after an expected generic competitor failed to materialise as Astra's treatment came off patient protection.

At the start of the year the FTSE 100 company expected annual sales to decline but Astra has improved its outlook for the second time following a stronger third quarter than expected.

Web - AstraZeneca - 6 November 2014

However, core earnings per share growth, which strips out one-off costs, is expected to drop to 5% from 10% on current exchange rates. Then there's the huge 80% slump in third quarter pre-tax profits, to $322 million, largely because of increased research and development (R&D) and rising cost of sales, leaving much for investors to ponder.

One issue to mull is the future intentions of Pfizer (PFE:NYSE), the US drugs giant. Astra successfully repelled a £69 billion takeover attempt by its US rival during the summer. Priced at £55.00 per share, many investors may today feel that Pfizer's offer was a missed opportunity. But it is not impossible that the US group could launch another strike.

Under UK takeover rules Pfizer would be allowed to make a fresh bid for the company when its embargo is lifted at the end of November. This poses two points. For fans of Astra remaining independent, the group's improved outlook could lend greater credibility to chief executive Pascal Soriot’s claim that sales will double by 2023 if shareholder stick by the current board.

However, run the numbers and that implies average annual growth of perhaps 8% to 10% between now and then, decent but hardly extraordinary. Which means that  for investors less inclined to tow management's independence line, Astra upgrading its own outlook could feed any remaining takeover ambitions that Pfizer may retain. A renewed attempt at a merger between the pair could do Astra's share price a world of good.

Issue Date: 06 Nov 2014