News from drugs giant AstraZeneca (LON:AZN) this morning was like the proverbial curate’s egg: good in parts.
On the positive side, Astra reported positive results from the Faslodex FALCON study for hormone-receptor-positive (HR+) first-line breast cancer treatment, with Faslodex showing superiority to Arimidex on progression free survival.
“This is good news, however we believe a fairly high chance of success was already anticipated by the market, based on the Phase II FIRST study results, which had shown a similar benefit,,” noted JP Morgan Cazenove.
The broker reckons a broadening of the current Faslodex label from second-line treatment to first-line could potentially add a few hundred million to annual sales, which totalled around US$700mln in 2015.
The market expects Faslodex sales will rise to around US$823mln by 2020, and Cazenove estimates today’s news could add around US$300mln to this figure, which for a company of Astra’s size is hardly going to move the dial.
On top of that, Faslodex faces patent expiry in mid-2021 and would therefore likely have less than five years of these elevated sales.
“We also note that despite superiority over Arimidex, the availability of generic Arimidex, particularly in Europe, could limit the commercial potential, as could the need for an injection vs. a pill,” according to Caz.
On the downside, the US Food and Drug Administration (FDA) issued a Complete Response Letter (CRL) regarding the New Drug Application (NDA) for sodium zirconium cyclosilicate (ZS-9), the investigational medicine being developed for the treatment of hyperkalaemia (high blood potassium), rather than an approval.
The CRL implies a six-month review period from when Astra refiles its submission, which Caz reckons could take a couple of months.
“We therefore anticipate a c.9 month delay to ZS-9 approval in the US, approval now likely Q2 2017. European timelines, with approval expected H1’17 are not expected to be impacted,” Caz ventured.
As with the Faslodex news, moving US ZS-9 sales out by nine months would only have a minimal impact on the net present value of Astra, but Caz reckoned that the development would have a bigger impact on sentiment, given that Astra only recently acquired the asset.
Thus far, Caz’s instinct that Astra shares would under-perform today as a result is proving wide of the mark; the shares are up 0.4% in a market down 0.2%.
Deutsche Bank described the ZS-9 news as “a bump in the road”. Taking a similar line to Caz, it suggests that the FDA’s verdict will raise doubts over Astra’s due diligence on its US$2.7bn acquisition of ZS Pharma, but the delay should materially damage the drug’s commercial prospects.
ZS-9’s major advantage over the existing industry benchmark, Veltassa, is the latter’s requirement for a “black box” warning on its prescription label in regard to its interactions with other oral drugs that could limit its usefulness for sufferers who are also taking a lot of other medication.
Deutsche sticks with its ‘buy’ recommendation for Astra.
Computer chip designer ARM Holdings PLC (LON:ARM) has announced details of its new generation mobile central processing unit (CPU), the Cortex-A73, code-named Artemis.
It is the smallest and most efficient processor for premium devices and enables virtual and augmented reality, Exane BNP Paribas noted as it reiterated its ‘outperform’ rating for the British tech champion.
Ten customers have already licensed the Cortex-A73. The group has also announced its new graphic core, the Mali-G71, and HiSilicon, Mediatek and Samsung have already taken a licence.
“We understand the new architectures will command a slightly higher royalty rate per chip,” Exane said. Shipments should begin in the second half of next year.
“The announcement reinforces our call on a higher royalty rate per device, i.e., higher semiconductor content,” the broker said.
Thermal processing specialist Bodycote PLC (LON:BOY) revealed at Thursday’s annual general meeting that trading in the first four months of the year had been challenging, but no worse than had been expected.
Predictably, the oil & gas (o&g) sector was proving a major drag on performance.
“Upticks in aerospace and the US provide reasons for optimism, along with easing comparators. While o&g head winds look likely to remain, this now represents a small portion of the business,” noted RBC Capital Markets, as it upped its price target to 645p from 625p.
“General industrial weakness may, however, prove more persistent and meaningful. IP [industrial production] forecasts will likely need to turn before earnings momentum returns. Currently, we see the shares approaching fair value,” the bank said.
The purchase and delivery of a factory new Airbus A321-200 aircraft to Vietjet, announced this morning by Avation PLC (LON:AVAP), is another demonstration of the company’s growth strategy, joint house broker WH IRELAND claimed.
“Growth in additional aircraft will be delivered through a combination of debt, equity and sales of older aircraft, the rate and mix of which is dependent upon a number of factors. However, the shares remain undervalued on a range of valuation metrics compared to international peers; and the potential IPOs of aircraft leasing businesses in Hong Kong over the coming months are likely to reinforce this,” the broker claimed.
“We continue to view Avation as an exciting and yet undervalued growth story and maintain both our buy stance and 260p share price target,” the broker concluded.
Iodine producer Iofina plc (LON:IOF) needs to cut its production costs to “world-class levels” if it wants to achieve EBITDA breakeven this year, according to finnCap.
The broker has said it expects “another tough year” for Iofina, with prices and production volumes likely to be lower than last year.
finnCap said Iofina will also need to reduce its iodine inventories to mitigate the drop in prices and volumes.
It reiterated its target price of 18p and praised the iodine specialist for performing as well as it did last year in “a very tough operating environment”, but cautioned that the “iodine market remains weak.”