Last Thursday’s third quarter results from AstraZeneca PLC (LON:AZN) illustrated past and future sales trends for the drugs giant, according to French broker Exane.
The past was represented by generic versions of Crestor and Nexium syphoning off sales from those cash cows, while solid growth from Forxiga, Lynparza and Tagrisso should represent the future.
“However, a few issues in the quarter with Symbicort (US impacted by rebate true-ups), Brilinta (US stocking effects in prior period) and emerging markets (Saudi Arabia and Venezuela) created additional head-wind,” the broker noted.
In Exane’s view, the investment case for AstraZeneca boils down to three things: pipeline, pipeline and pipeline.
“Notwithstanding their undershooting of expectations, the market sought to focus on Astra’s emerging pipeline, with considerable time on the conference call dedicated to the upcoming MYSTIC 1st line lung cancer study of durvalumab and tremelimumab combination therapy,” Exane noted.
“Data are still expected in H1 [first half] 2017 and represents the single biggest date in the catalyst diary for most investors. Though our combined NPV [net present value] for all indications, individually and combined, for these two drugs is around 470p/share, market expectations of share price moves range from -20% to +25%. We would suggest plus or minus 15% is more likely, but even that is more than twice the fundamental impact,” Exane said.
Exane has a target price of 5,100p, versus a current price of 4,406p.
Meanwhile, Deutsche Bank (DB) is feeling more confident about its ‘buy’ recommendation for Astra’s sector peer, Shire Plc (LON:SHP), after the Irish drugs company’s recent investor event in New York, even though the occasion was more educational than revelatory.
“Shire's investor event was focused on educating investors over the prospects of its pipeline and the recently acquired haematology and immunoglobulin franchises.
“Our discussions with Shire's haemophilia team continue to reinforce our view that clotting factor therapy will remain a mainstay of therapy for 1L [first line] patients for many years to come. Given disclosure that no cases of thrombotic micro-angiopathy (TMA) have ever been reported with FEIBA monotherapy, we are increasingly of the opinion that our haemophilia/inhibitors forecasts may prove too conservative, given logistical concerns over use of ACE910 in patients with inhibitors and lingering safety concerns in the 1L setting,” DB said.
The German bank was also reassured by updates on Shire's pipeline, and thinks that “risks are to the upside for our forecasts”.
“As a reminder, Shire's late-stage pipeline assets contribute just around US$1.5bn in sales to our 2020E sales forecast of circa US$19bn, leaving significant upside potential if management's reiterated 2020 group sales target of US$20bn is achieved,” DB said.
DB’s discounted cash flow analysis implies a valuation of 6,200p per share for Shire, versus the current price of around 5,020p.