AstraZeneca PLC (LSE:AZN) shares have been downgraded by UBS on the basis that there are “no major catalysts” in its drug pipeline for the rest of the year.
Shares in the FTSE 100 pharma giant fell 3.9% to 7,401p on Tuesday's morning session.
The shares are currently trading on a small discount to the wider pharma sector on full year forecast earnings, and a 10% discount on 2025 earnings, the Swiss bank noted.
AZ’s major clinical trial read-outs for this year, including impressive results for Lynparza and Enhertu, are now “behind us”, UBS said, so the focus will now return to the performance of drugs such as Tagrisso, Lynparza, Calquence and in China.
However, analyst Michael Leuchten said: “In times of reduced pipeline noise, the market tends to focus more on AZN's margin progression and we suspect this time it will be no different.”
Tagrisso is “still not picking up the pace”, there is “little potential” for Alexion to deliver meaningful upside and, while Lynparza in breast cancer is expected to be a different story, “discussions in and around commercial execution probably are awarded lower multiples than blue-sky pipeline scenarios”.
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The analyst predicted there would also be some “additional debate around the trajectory in China”, which represents around a fifth of group sales, but for the current quarter will be “on the softer side given the recent lockdowns”.
In the longer term, the UBS pharma team believe that with the positive DESTINY metastatic breast cancer trial results for Enhertu, which produced a standing ovation when unveiled at a conference earlier this month, AZ “has the potential to build out a platform of antibody-drug conjugates” (ADCs) of which Enhertu is the first.
The next instalment is DS1062/TROP-2 in lung cancer, this is but not until 2023.
UBS therefore cut its recommendation to ‘neutral’ from ‘buy’ and its share price target to 10,100p from 10,500p.