Morningstar | AZN Updated Forecasts and Estimates from 30 Apr 2019
AstraZeneca reported first-quarter results largely in line with our expectations, and we don't expect any significant changes to our fair value estimate. We continue to view the company as slightly overvalued despite a strong growth outlook from currently marketed drugs. The strong product growth in the quarter increases our confidence that Astra will depend less on asset sales to drive consistent cash flows. As Astra has finally moved past major patent losses, we view its strong portfolio of drugs along with a solid midstage pipeline as supportive of its wide moat.In the quarter, total sales increased 11%, buoyed by 59% growth from cancer drugs, and we expect these trends will continue. In particular, EGFR mutated lung cancer drug Tagrisso should continue to gain share; we believe the drug's best-in-class clinical data will make it the standard of care in this setting of lung cancer for many years. Immuno-oncology drug Imfinzi looks well positioned in stage 3 lung cancer with a strong first-mover advantage. PARP-related cancer drug Lynparza is increasingly well positioned in several cancer settings, including ovarian and breast cancer, which should support strong long-term growth. The strong efficacy of these drugs in areas of unmet medical need should support strong pricing power.
Outside of cancer drugs, Astra's positioning is mixed, with older drugs facing increased competition and eroding pricing power. Despite growth in the overall respiratory franchise in the quarter, we believe the respiratory franchise will face increasing competitive pressure for older, less differentiated drugs like Symbicort (second-largest product for the company). Despite some of these headwinds, Astra's overall growth profile is improving, and we expect the historical heavy use of asset sales will decrease, which will limit some growth but will also reduce dependence on an unsustainable practice.
For a complete review of Astra's pipeline and currently marketed portfolio, please see "Annual Drug Pipeline Report: Moats Remain Secure as Innovation Counters Pricing and Generic Headwinds, but M&A Accelerating."
AstraZeneca is a holding company. Through its subsidiaries, Co. operates as a biopharmaceutical company engaged in discovering, developing, manufacturing and commercializing its pipeline of small molecule and biologic prescription medicines, including targeted business development through collaboration, in-licensing and acquisitions. Co. is focused on three main therapy areas: Oncology, Cardiovascular and Metabolic Diseases, and Respiratory. Co. is also selectively active in autoimmunity, infection and neuroscience. In addition, Co. works across small molecules, oligonucleotides and other drug platforms, as well as biologic medicines.
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