AstraZeneca PLC's (LON:AZN) shares bounced to one-month highs after City broker Liberum upgraded its rating for the pharma giant to a ‘buy’, saying that new drug launches will cure its six-year-long sales slump.
On Thursday, the drug developer posted glowing third-quarter results which showed revenues up 16%, with new drugs sales growing by 62% to US$2.7bn.
Patent expiries have slowed the brand’s sales over the last few years, which retreated to $21bn in 2017, down from a peak of $34bn six years earlier.
Buoyed by the latest figures, Liberum said the company is poised to add over $13bn in product sales over the next 5 years, saying that its pipeline of new products has “sufficient firepower to feed this franchise well into the next decade”.
Astra’s five new products to be delivered includes ovarian cancer drug Lynparza, of which phase III trial showed an unprecedented median progression-free survival (PFS) of 22 months when used in combination with standard treatment Avastin.
Another of its drugs, Tagrisso, was first approved to treat non-small cell mutated lung cancer after EGFR inhibitors had failed, but recent trials have proved its efficacy as a first-line treatment.
Tagrisso even eclipsed rival drugs such as Roche’s Tarceva in 2017 first-line trials, with longer survival and fewer severe side effects, and Liberum pointed out that Astra’s drug is now set to take prime position, leading to potential sales of $4.5bn in the US alone.
The broker was impressed by Astra’s ability to kickstart growth while managing to keep operational costs of the business, including research and development, relatively stable between US$13-15bn per year.
The pharma giant was also bullish on full-year sales, expecting an increase by “a low to mid-teens percentage”, up from prior guidance for “low double-digit” growth.
Liberm upgraded Astra from ‘hold’ having raised its target price to 8,250p, a substantial increase on the current share price which stood at 7,335p at noon on Friday.