AstraZeneca Promising Result on COVID-19 Vaccine to Boost Stock; Target Price GBX 10,970

The promising result on early-stage trials of AstraZeneca’s potential COVID-19 vaccine, which is expected to be announced as early as today, could boost demand for the stock.

The potential candidate is in large-scale Phase 3 human trials to see the vaccine helps protect against the deadly coronavirus; however, the company is yet to publish its Phase 1 results which would explain whether it is safe and can induce strong immune responses to fight the virus. However, many will eye the response of T cells in research as it is expected to be an important defence against coronavirus.

Earlier this month, the British-Swedish multinational pharmaceutical and biopharmaceutical company, said that they were satisfied by the immune response they witnessed during the trials and were anticipating to officially publish the outcome by the end of the month.

Also, the WHO’s chief scientist said last month that AstraZeneca’s COVID-19 vaccine, known as AZD1222, was the most advanced in terms of development.

Moderna started its Phase 2 trial in May and expects to start a Phase 3 trial on July 27. Our call is to buy Moderna as COVID-19 vaccine showed promising result; target price $112 in a best-case scenario.

At the time of writing, AstraZeneca shares traded 5% higher pre-market.

AstraZeneca stock forecast

Morgan Stanley target price is GBX 9,000 with a high of GBX10,970 under a bull scenario and GBX 6,314 under the worst-case scenario. JPMorgan set a GBX 9,500 target price on AstraZeneca and has a ‘Buy’ rating on the biopharmaceutical company’s stock.

Several other equity research firms have also updated their outlook AstraZeneca. Jefferies reissued a hold rating; Bryan, Garnier & Co increased their price objective to GBX 9,100 from GBX 8,780 and gave the company a ‘Buy’ rating. Liberum Capital maintained a ‘Buy’ rating on shares of AstraZeneca. In April, HSBC upped their target price on AstraZeneca from GBX 6,450 to GBX 6,690 and gave the company a reduce rating.

We second Morgan Stanley and JP Morgan on AstraZeneca stock outlook. We also think it is good to buy at the current level as 50-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

Analyst view

“AstraZeneca has the highest sales and EPS growth within EU biopharma over 2019-22, with the shift to speciality care driving underlying margin expansion. Our analysis shows a 52% price deflation for drugs initially impacted by the 4+7 Centralised Procurement Scheme in China and that >40% of AstraZeneca’s emerging market revenues could face generic pressures before 2025,” said Mark Purcell, equity analyst at Morgan Stanley.

“Enhertu (DS-8201), the ADC drug partnered with Daiichi Sankyo, has very high sales potential. We forecast 2028 risk-adjusted sales of $7.4bn, including >50% probability in various breast cancer indications and a low probability for gastric, colorectal and NSCLC indications,” he added.

Upside and Downside risks

Positive pivotal data from the pipeline including Imfinzi+treme, tezepelumab and Enhertu, growth acceleration in EM ex-China, Morgan Stanley highlighted as upside risks to AstraZeneca.

Regulatory hurdles for roxadustat, broader pipeline failure (Enhertu), operating costs exceed expectations, competitive risks to the pharma pipeline and growth platforms. Impact of China VBP reform on the legacy portfolio and impact from COVID-19 global on operations, Morgan Stanley highlighted as downside risks.

Morgan Stanley forecast sales to increase by +0.5% in 2020 and between +0.8% and +0.7% in 2021-26; EPS is expected to remain unchanged in 2020 and rise between +0.8% and +0.5% in 2021-26.