AstraZeneca: Analysts point to promising pipeline despite Covid vaccine jitters

A healthcare worker prepares to inject an AstraZeneca coronavirus disease (COVID-19) vaccine.

Eloisa Lopez

Controversy over AstraZeneca‘s Covid-19 vaccine has sparked some investor concerns about its stock, according to Jefferies – but it’s not all bad news for the British pharmaceutical company.

Australia, the Philippines and the African Union have become the latest to either curb or abandon planned purchases of the Oxford University-AstraZeneca coronavirus shot due to possible links to blood clots.

It comes after the U.K.’s health and vaccine regulators issued a change of guidance on Wednesday over who should receive the shot, proposing that under-30s get an alternative vaccine. Both the U.K. and European medicines regulators (the MHRA and EMA, respectively), have emphasized that the benefits of the jab still outweigh the risks, but EU leaders have yet to agree on a joint policy regarding the shots.

In a research note earlier this week, Jefferies Research Analyst Peter Welford said he had received pushback from clients over a recent decision to upgrade AstraZeneca’s stock to buy, based on the “noise” around the vaccine.

This despite the fact that the company has pledged that the vaccine will be not-for-profit for the “duration of the pandemic,” and will be offered on a non-profit basis in perpetuity to low and middle-income countries.

The overall blood clot risk has been estimated at around one in 250,000, and British policymakers and health experts have rushed to defend the vaccine in recent days.

Welford noted that despite the company’s “remarkable successes” in gaining regulatory approval and ramping up manufacturing of its profit vaccine, the safety concerns raised in Europe are “top of mind for many generalists.”

“We view FDA Emergency Use Authorization and agreements around dose distribution in U.K./EU as key to shift debate beyond the COVID-19 vaccine, albeit concerns it has been a distraction for management may linger,” he contended.

The vaccine has been approved for use in the U.K., Europe and elsewhere, and hundreds of millions of doses have been ordered by countries across the world. However, it has not yet been granted emergency use authorization in the U.S.

Looking beyond the shot, Jefferies upgraded AstraZeneca to buy in mid-march, pointing to its “compelling growth profile within EU pharma” and its relative discount based on the expected strategic benefits of its $37 billion acquisition of Alexion Pharmaceuticals, expected to close in the third quarter.

Welford defended the move by highlighting that the company’s 15x estimated 2022 price-to-earnings ratio — a mechanism for determining whether a company’s stock is fairly valued — is similar to its peers, despite its “leading growth profile.”

Promising pipeline

AstraZeneca was trading at £7,337 per share on the London Stock Exchange Friday, and Jefferies has set a price target of £8,850. In Wednesday’s research note, Welford again pointed to multiple catalysts in the pipeline which could propel the stock higher in the coming months.

Phase three trial data is expected for its breast cancer treatment enhertu is due in the second half of 2021, along with potential approvals for its anifrolumab drug to treat lupus. Jefferies also anticipates approvals for asthma drug tezepelumab in the first half of 2022 after “impressive” phase three data, and a long-delayed approval for anemia candidate roxadustat in the second half of 2021. Updated phase one and two data on lung cancer treatment datopotamab is also expected soon.

In a recent note, Morningstar Director of Healthcare Equity Research Damien Conover said of AstraZeneca, “the strong overall innovation seen with the vaccine and pipeline reinforces our conviction in the firm’s wide moat.”

He added that AstraZeneca was “making strides in targeting areas of unmet medical need,” projecting that phase three trial data for the company’s farxiga treatment for preserved heart failure was likely to result in approval for the medication.

Conover categorized anifrolumab as “higher risk of approval,” while roxadustat was deemed “medium risk” and tezepelumab “lower risk.”

“Longer term, we are encouraged by the robustness of the company’s early-stage pipeline, and opportunities to create combinations with Farxiga look well positioned to treat several large cardiometabolic indications where unmet medical need remains high,” Conover said. He added that Morningstar also remains bullish on AstraZeneca’s pipeline for cancer drugs.

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