AstraZeneca

Company Update:
Astra’s candidate Etcamah (camizestrant, approved for a specific type of breast cancer) did not show a clinically meaningful improvement in progression-free survival while given as a first line treatment for advanced breast cancer patients. While the management had guided for a $5bn peak sales potential for Etcamah, this setback is likely to reduce that figure to $2-3bn. Still, the drug is being tried in treating early breast cancer patients, whose trial readouts are expected next year.

In the last three months, Astra has now seen three key late-stage setbacks – one in breast cancer, one in lung cancer, and one in cardiovascular area. These setbacks may fuel the rumours around pipeline weakness as one of the reasons behind Astra’s (now discarded) intent to chase a biggish acquisition (in the form of Bristol-Myers Squibb).

Overall, while we see these R&D failures as disappointing, they are inevitable in the world of innovative pharma business. For cancer treatments, phase III success rates are generally around 40% vs. 55-60% for non-oncology medicines. For Astra, one may stay put and add drops at every meaningful correction, in case one has the stomach to ride against the tide, considering the firm’s longer-term history of rising from the ashes.

Expert Opinion:
AstraZeneca is already having the worst performance YTD (-14%) in our Pharma coverage but is still trading on PE27 of 17.2x, ie the second most expensive in the sector.  Our favorite stock in the sector at this stage is Roche, which despite its intrinsic qualities still tardes below average (even though its discount has reduced massively)

We also still view Novo (seemingly the new name of Novo Nordisk- hopefully they didn't spend millions in consulting fees to find the name) as an attractive play with low valuations and what are now very low expectations outside of Semaglutide. 

We could have potential positive nexsflow into the CMD on September 14.  




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