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AstraZeneca lung cancer trial results impress but risks remain, analysts say

Analysts see the results of phase III trials for Imfinzi and Tagrisso as a positive development for AstraZeneca but have raised concerns about other areas of the business
Analysts have put AstraZeneca under the microscope

AstraZeneca PLC (LON:AZN, NYSE:AZN) has impressed analysts with the results of two separate trials of lung cancer treatments Imfinzi and Tagrisso, sending its shares higher today.  

The pharmaceutical company said its phase III Pacific trial of Imfinzi (durvalumab) showed an improvement in progression-free survival (PFS) by 11 months compared with standard of care in patients with locally-advanced unresectable lung cancer.

The trial is continuing to evaluate the other primary endpoint, overall survival.

The Flaura trial of Tagrisso in patients with and without brain metastases reduced the risk of progression or death by more than half.

The treatment also revealed median progression-free survival of 18.9 months, compared with 10.2 months for the current standard of care.

Shares rose 2.27% to 4,898p in afternoon trading. 

A turning point for AstraZeneca, says Deutsche Bank

Deutsche Bank raised its target price to 5,600p from 5,300p and maintained its ‘buy’ rating, saying it sees the results presented at the European Society of Medical Oncology (ESMO) in Madrid as a "turning point" for the company.

The bank said the results of Imfinzi and Tagrisso were the highlight of the meeting and should secure the company's return to growth driven by its new oncology portfolio, which also includes ovarian cancer treatment Lynparza.

“Our revised forecasts suggest AstraZeneca’s new oncology portfolio (Tagrisso/Lynparza/ Imfinzi) will add an incremental more than US$4.5bn in sales over fiscal years 2016 to 2020,” Deutsche Bank said.

“This underpins our expectations for a return to above peer group earnings per share growth (2017-2022 compound annual growth rate of 12%).”

Trial results beat Liberum’s expectations

Liberum repeated a ‘buy’ rating and target price of 4,800p, saying the trial results have beaten what were already high expectations.

“The Flaura Tagrisso data delivered almost exactly what was expected at PFS but with the kicker of positive early overall survival trends,” Liberum analysts Roger Franklin and Graham Doyle in a note to investors.

“More importantly, in Pacific, the magnitude of the PFS benefit over placebo was truly impressive at over 11 months (much greater than the 7-9 months that we think was expected and is required to deliver the circa US$1bn in estimates) with meaningful benefit across the PDL1 (a type of protein in humans that supresses the immune system against disease) spectrum.”

Pacific does not give hope for Mystic trial, analysts warn

Liberum warned against some market expectations that the compelling data on Imfinzi increases the chances of success in the company’s remaining trials, including Mystic’s forthcoming overall survival data.

In July AstraZeneca published initial results from its Mystic drug study, which showed that a combination of Imfinzi and tremelimumab was no more effective than chemotherapy at halting the growth of tumours in lung cancer patients. The Mystic trial is continuing to assess overall survival.

UBS analysts echoed Liberum’s remarks in saying:  “Does Pacific give us more hope for overall survival data from Mystic? No. Pacific probably worked well as chemo-radiation makes tumours sensitive to PDL1 blockade.”

Tagrisso and Imfinzi expected to boost sales

UBS left its rating at ‘buy’ and target price at 4,550p. The bank expects Tagrisso sales will peak at around US3.5bn by 2025 and forecasts about US$1bn of Imfinzi sales following directly on from the Pacific trial.

On Pacific, UBS said its statistical analysis showed that Astra needed more than a 30% risk reduction on PFS and has achieved a 48% reduction. “We were concerned that mature overall survival (OS) would be required before brisk adoption, but given the size of the PFS effect, this concern has receded. “

On Flaura, UBS said the results were “impressive” but raised some questions about optimal phasing.

“Tagrisso's impressive hazard ratio for PFS (0.46), benign safety profile, and good activity against brain metastases now put it in a good position,” the bank said.

“But first-line dominance will be assured only when we know that overall survival for patients who start on Tagrisso and move to chemo is at least as good as for patients who start on Iressa or Tarceva (or newer but similar drugs) , then take Tagrisso, and then chemo.”

Jefferies raises concerns about earnings quality

US broker Jefferies said while the trial results were positive developments it remains concerned about earnings quality at AstraZeneca. It maintained a ‘hold’ rating and target price of 4,800p.

“We remain on the sidelines with AstraZeneca as earnings quality remains poor, driven by externalisation and asset sales, which will be difficult to wean the company off over the mid-term without impacting EPS growth,” the

“Furthermore, consensus still fails to adequately model the impact of externalisation and asset sales on the base business over the mid term, which could drive negative earnings momentum.”

Jefferies said risks include competition from generic versions of its drugs, regulatory hurdles, research and development issues, pricing, and mergers and acquisitions.

AstraZeneca has been offloading assets to focus on oncolocy medicines. This year it has sold the commercial rights of its Zoladex cancer treatment in the US and Canada to TerSera Therapeutics, sold its migraine drug Zomig to Germany’s Grunenthal and sold the European rights of its heart failure drug Seloken to Italian drugmaker Recordati.

In June AstraZeneca’s chief executive Pascal Soriot said the company, which rejected a bid by US rival Pfizer three years ago, was still “exposed” to a takeover.


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