Following AstraZeneca PLC's (LSE:AZN) update on its new cancer drug, datopotamab deruxtecan (Dato-DXd), several brokers have weighed in, including Deutsche Bank downgrading its stance and UBS saying the press release was "quite vague".
Shares in the largest company on the FTSE 100 dropped almost 8% at the start of the week, erasing £14bn of value from the company's market cap and sending the shares to a four-month low below 10,400p.
On Tuesday, the shares had bounced back almost 2% to 10,573p.
Deutsche analyst Emmanuel Papadakis said the bottom line of the long-awaited update was that, "whilst technically a headline success and details remain pending, the result is clearly underwhelming in several important respects".
He said these place "question marks over the potential" for the drug's focus on the TROP2 protein in first-line non-small cell lung cancer (NSCLC).
"There is still plenty to like about the AZN investment case but we think it's likely to take a breather for the remainder of 2023 at least," the analyst said, cutting to a 'hold' rating from a previous 'buy' stance taken in 2021.
Citi analyst Andrew Baum said the absolute improvement in progression-free survival (PFS) in dato-DXd treated refractory NSCLC patients "may not be the home run in absolute benefit that investors hoped for".
However, he and his collages "anticipate dato-DXd will likely secure approval" given its hazard rate ratio below 0.8 "and an overall better tolerated adverse event profile than taxotere", which is a chemotherapy option.
"We anticipate that the absolute and relative benefit may be greater in the 50% of patients in TL-01 without actionable genomic mutations (AGA").
Thinking about the broader commercial opportunity, Baum said the efficacy data from TL-01 has "partially derisked" the three ongoing fist line phase III trials.
In the treatment refractory setting, he said, observed higher rates of grade 5 ILD "will likely raise competitive concerns" versus Merck's SKB264.
Citi maintained its peak global sales estimate for the drug of circa US$12bn.
UBS's Michael Leuchten said the PFS benefit is "not quantified" and AZN "did not call out clinical meaningfulness (which it normally does)".
"The trial at this point is not mature enough for overall survival," Leuchten said, the release calls out an early overall survival (OS) trend - "AZN does not do that normally either".
Wondering how best to interpret the press release, the UBS analyst said: "The hope now is that the OS trend will mature over time. Whether these results once presented are strong enough to allow read-across into the front line setting is not clear. There is maybe more need for a biomarker than we thought."
The UBS analyst said pressure on the shares was expected as "Dato-dxd expectations are high".