AstraZeneca PLC (LSE:AZN) investors looking beyond the short-term noise of Medicare reform and currency headwinds may want to focus on a growing pipeline of clinical catalysts and a valuation that UBS believes underplays the company’s longer-term potential.
The bank retains its 'buy' rating with a price target of 14,200p, offering more than 30% upside from the current share price of around 10,600p.
The investment case rests not just on cost control or solid first-quarter earnings, but on a raft of upcoming data readouts that UBS sees as undervalued by the market.
Among them is Datroway (a breast and lung cancer therapy), which could achieve peak sales of $2.75 billion and has a 25% probability of success according to UBS estimates.
Another is baxdrostat, AZ's treatment for resistant hypertension, which could generate $2 billion and carries a 60% probability. Enhertu, its high-risk HER2+ breast cancer drug, is expected to produce $1.5 billion in peak revenue with an 80% chance of success.
Even near-term, catalysts such as Breztri in asthma and Imfinzi in bladder cancer could boost sentiment.
Combined, these programmes represent roughly $13 billion in potential peak sales still to be de-risked this year.
That equates to a sales-weighted probability of success of 57% according to UBS, which suggests plenty of scope for upside surprises.
Part D reform in the US has pressured headline sales but not volumes, with Calquence and Tagrisso actually seeing 20% volume growth. Astra expects this to flow through more clearly in the second half of the year.
While the pipeline remains heavily weighted to oncology, a crowded field, UBS argues that breadth across rare disease, cardio-renal and immunology supports durability.
With AstraZeneca trading at under 14 times expected 2025 earnings, it may not take much for investor sentiment to turn decisively.
In afternoon trading, the shares were changing hands for 10,776p, up 1.5%.