With the pandemic situation showing little signs of improvement, healthcare institutions are under pressure to expedite their vaccine development programs, amid growing frustration among the stakeholders. AstraZeneca (NASDAQ: AZN), which has been in the race to find a treatment for COVID-19 for quite some time, got a shot in the arm last week when its antibody medicine entered the last leg of clinical trial and secured funding from the government, bringing cheer to shareholders.
So far, the UK-based pharmaceutical giant has remained unfazed by the slowdown in healthcare activities during the pandemic and ended the first half on an upbeat note, while most of its European peers witnessed a slowdown. The market sentiment brightened after the antibody program achieved an important milestone this month, easing concerns over the discontinuation of trials on the company’s COVID-19 vaccine, due to safety concerns.
The consensus target price shows the stock is headed for a new peak in the near future, offering a buying opportunity that is worth considering. The stock can create extra value for investors who add it to their portfolios, preferably before the next earnings announcement that is scheduled for November 5. The extensive global presence and diversity of the firm, which provides a wide range of products led by specialty drugs and the oncology segment, should help it stay resilient to the market crisis in the second half.
From AstraZeneca’s Q2 2020 earnings conference call:
“In 2019, like in 2020, we are aiming to increase operating leverage, driven by a high-single-digit to low-digit — low-double-digit percentage increase in total revenue, and this is anticipated to drive growth in core EPS of mid- to high-teens percentage.”
Milestone for Antibody
The optimism is largely due to the positive results from early-stage studies on the company’s experimental long-acting antibody treatment AZD7442, which entered the final phase of the clinical trial last week. The medicine is similar to the therapy that is claimed to have cured President Donald Trump, who received a combination-drug developed by Regeneron Pharmaceuticals Inc. (REGN) as part of the COVID-19 treatment.
The market has been closely following AstraZeneca’s drug development program, in the wake of others like Regeneron and Eli Lilly & Co. (LLY) seeking emergency-use authorization for their respective candidates, which the FDA is yet to approve. Recently, the company received a $486-million grant from the government to take forward the phase-III trial on the antibody medicine.
The management plans to deliver about 100,000 doses by year-end and about one million doses next year. While working towards that goal, the company will also focus on its under-trial COVID-19 vaccine called AZD1222, which suffered a setback following reports of one participant suffering side effects.
The latest development assumes significance considering the recent FDA probe into the safety aspects of the vaccine program, which was halted in several countries. Though the AZD1222 clinical trials resumed in markets like the UK and Japan, it is still on hold in the US. Interestingly, the management wants to take up the whole program as a non-profit initiative and maintain it that way until the world becomes free from the virus.
Benefiting from the strong demand for new drugs, especially from the emerging markets, AstraZeneca’s second-quarter sales grew 8% to $6.3 billion, driving up core earnings by 32% to $0.96 per share. The positive outcome, together with advancements in the development of the antibody-drug, brightened investor sentiment.
Shares of AstraZeneca, which had withdrawn from the all-time highs seen in mid-July, recovered after the encouraging fiscal performance in the first half. Since then, they stagnated but outperformed the market. In what could be a sign of returning to the growth path, the stock is regaining steam and closed Monday’s session up 1%.
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