AstraZeneca’s (AZN - Free Report) stock is up 7.5% this year so far in contrast to the 0.5% decline of the industry.
Here we discuss a few reasons for the same.
Progress on COVID-19 Related Pipeline Efforts
A prime reason for AstraZeneca’s shares to rise this year is the rapid progress in its efforts to make a vaccine to treat COVID-19. AstraZeneca is developing a COVID-19 vaccine candidate, AZD1222 in partnership with Oxford University. Late-stage studies are ongoing in the United States UK, Brazil and South Africa with studies due to start in Japan and Russia shortly. Data from the late-stage studies are expected later this year. Data from the phase I/II study on AZD1222 announced in July showed that the vaccine candidate generated strong antibody and T-cell responses in the majority of patients.
Moreover, the company has signed supply deals with several countries under which it has committed to supply almost 3 billion doses of the vaccine, if it is successfully developed. Meanwhile, it has received more than $1 billion in funding from BARDA for the development, production and delivery of the AZD1222 vaccine. The company targets to file a regulatory application with the FDA later this year.
Last week, AstraZeneca initiated a phase I study on AZD7442, a monoclonal-antibody combination for the prevention and treatment of COVID-19. AZD7442 is a combination of two monoclonal antibodies, AZD8895 and AZD1061, which were derived from convalescent patients with SARS-CoV-2 infection, which AstraZeneca licensed from Vanderbilt University, in the United States in June 2020.
Key New Drug Approvals
In late 2019/2020 so far, AstraZeneca gained approval for two key new medicines. Koselugo (selumetinib) for the treatment of pediatric patients with neurofibromatosis type 1 (NF1)-related plexiform neurofibromas (PN), a rare and debilitating genetic condition, was approved by the FDA in April 2020. Meanwhile, trastuzumab deruxtecan was approved by the FDA in third-line HER2-positive metastatic breast cancer in December 2019 and immediately launched under the brand name of Enhertu. AstraZeneca acquired joint development and commercialization rights to trastuzumab deruxtecan from Japan’s Daiichi Sankyo in 2019. Meanwhile, its triple combination therapy, Breztri Aerosphere was approved by the FDA as a maintenance treatment for chronic obstructive pulmonary disease (“COPD”).
Newer Drugs Driving Sales
AstraZeneca’s newer drugs like Brilinta (cardiovascular), Lynparza (ovarian cancer), Farxiga/Forxiga (type II diabetes) and Tagrisso (lung cancer) are driving AstraZeneca’s top-line growth in 2020, with AstraZeneca launching them in more markets and in an increased number of indications. Five of its newer medicines (Tagrisso, Brilinta, Farxiga, Imfinzi and Lynparza) now have blockbuster status. AstraZeneca markets Lynparza in partnership with Merck (MRK - Free Report) .
AstraZeneca is looking for further label expansions for all these drugs. Lynparza was approved for metastatic castration-resistant prostate cancer (with HRR genetic mutations) in the United States in May 2020, which marked the drug’s approval for the fourth cancer type. In May, Lynparza was also approved by the FDA in combination with Roche’s (RHHBY - Free Report) Avastin as a maintenance treatment for first-line advanced ovarian cancer in women who have an HRD-positive tumor. Imfinzi, in combination with chemotherapy, was approved for extensive-stage small cell lung cancer in United States, Japan and Europe this year.
AstraZeneca has also engaged in external acquisitions and strategic collaborations to boost its pipeline while investing in geographic areas of high growth like China. This year, it signed its second big cancer deal with Japan’s Daiichi Sankyo to acquire joint global (except Japan) development/commercialization rights to the Daiichi’s antibody drug conjugate (ADC) DS-1062, which could be a potential medicine for lung, breast and multiple other cancers that commonly express TROP2, a transmembrane glycoprotein.
It goes without saying that AstraZeneca has its share of challenges. Its products like Nexium, Crestor and Seroquel are facing generic competition, which is hurting sales. The diabetes franchise also faces stiff competition while pricing pressure is hurting sales in the respiratory unit. Nonetheless, AstraZeneca’s newer drugs, mainly cancer medicines Lynparza, Tagrisso and Imfinzi should keep driving revenues. Its pipeline is strong with abundance of catalysts lined up for 2020 including data on COVID-19 vaccine candidate, AZD1222. Cost-cutting efforts should drive earnings.
AstraZeneca currently carries a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A better-ranked large biotech stock is Regeneron Pharmaceuticals (REGN - Free Report) , which carries a Zacks Rank of 2 (Buy).
Its stock is up 54.5% this year so far. Its earnings estimates have risen from $28.04 to $28.25 for 2020 over the past 60 days and from $31.73 to $32.46 for 2021.
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