AstraZeneca PLC's (LSE:AZN) 'sell' rating has been removed by UBS follows a 24% drop in the share price over three months, triggered by ongoing investigations in China and disappointing trial data for its cancer drug Dato-DXd.
The Swiss bank upgraded to a 'neutral' rating while maintaining its 12-month price target of 11,300 pence.
While UBS acknowledged uncertainties tied to the Chinese government’s scrutiny, the investment bank said the Anglo-Swedish giant's long-term prospects in the country remain intact.
The People's Republic represents 13% of AstraZeneca’s sales but contributes less to overall profitability. UBS noted continued regulatory approvals in the country, a sign of sustained market confidence.
In addition, AstraZeneca’s pivot for Dato-DXd, narrowing its focus to a specific subset of lung cancer patients, was seen as a prudent move, albeit with reduced peak sales estimates. UBS revised its sales forecast for the drug to $2 billion by 2030, down from $2.6 billion previously.
Despite these challenges, UBS highlighted AstraZeneca’s robust late-stage pipeline and above-average research productivity as key strengths. However, the bank tempered expectations due to pressures from U.S. Medicare reforms, ongoing R&D costs, and unresolved governance issues.
AZ trades at a premium to peers, reflecting its strong growth potential. UBS maintains that while uncertainties persist, AstraZeneca’s diversified portfolio and strategic pivots could stabilize its performance over the medium term.
In early trading, the shares were up 0.6% at 10,088p.