Is AstraZeneca ready to leave COVID-19 vaccines behind?


AstraZeneca PLC (LSE:AZN) seems to be moving on from the COVID-19 vaccine focus as its oncology pipeline keeps delivering strong results, while it’s entering new areas of research with Alexion and Imperial College London.

On Friday, its Lynparza candidate showed better results when used with the current standard of care, called abiterone, than abiterone alone in patients with castration-resistant prostate cancer.

READ: AstraZeneca posts positive results for prostate cancer candidate

The news came days after breast cancer drug Enhertu delivered “ground-breaking” numbers in a late-stage trial, where 75% of women showed no progression in their disease after 12 months compared to 34% of those treated with trastuzumab emtansine, the standard of care.

Over the past week, the stock has added over 8%, corresponding to around GBP11bn in market value.

“Our peak Lynparza sales target of US$4bn contains just US$300mln from the prostate indication – this could be considerably higher with positive first-line data,” analysts at Liberum commented on Friday.

“This is yet another very positive development in Astra’s oncology portfolio and it will remain the most important growth franchise in the business, offering top-line growth and margin mix improvement.”

For Deutsche Bank (NYSE:DB), the data on Enhertu earlier this week was “absolutely startling indeed”, while Barclays said “Enhertu is increasingly looking like a transformative medicine in AZN’s best-in-class oncology portfolio”.

In the latest half-year results, the oncology business accounted for 40% of total sales, with Tagrisso and Calquence among the main drivers of group revenue growth.

In the second half this year, AstraZeneca planned to issue regulatory submissions for Calquence as leukaemia treatment, Imfinzi for lung and liver cancers and for Enhertu in HER2 breast cancer.

There are also some more data readouts in the wings, including Imfinzi in cervical, biliary tract and another type of lung cancer, as well as Enhertu for HER2 low breast cancer.

On top of this, the mega-acquisition of rare diseases specialist Alexion was completed in July, boosting AstraZeneca’s presence in the area, while it also stepped into the RNA technology world as soon as this week.

In fact, it invested in Imperial College London’s startup VaxEquity, which develops RNA therapeutics using its next-generation saRNA platform.

The latter works in a similar way to Pfizer (NYSE:PFE)’s and Moderna’s vaccines, meaning it treats diseases by influencing the behaviour of the relevant cell’s RNA.

The self-amplifying technology also makes copies of RNA containing the instructions, so doses can be smaller and cheaper.

“We believe self-amplifying RNA, once optimised, will allow us to target novel pathways not amenable to traditional drug discovery across our therapy areas of interest,” senior executive Mene Pangalos said.

Are vaccines a thing of the past?

The recent successes may convince management to move away from the vaccine involvement, as a potential exit has been on the cards for a couple of months.

In late July, the group said it had started to question its long-term role in COVID-19 vaccines and that it would make a decision by the end of the year.

“Before year-end, we will have more clarity… if you ask me, is the vaccine business a sustainable business for AstraZeneca for the next five or 10 years, that big strategic question is under discussion,” Ruud Dobber, President of Biopharmaceuticals Business Unit, told Reuters at the time.

“A small group of people reporting into Mene (Pangalos) and myself are thinking about (whether this is) a sustainable business.”

According to Morgan Stanley (NYSE:MS), investor sentiment was recently depressed by pipeline setbacks and rising concerns that continued investment for growth could pressure operating margins

However, analysts said “this narrative misses the strong operating performance and overlooks the sector-leading growth outlook”, while the acquisition of Alexion should support revenue growth.

“We believe AZN’s new product launches remain underappreciated and see 20-30% upside risk to consensus expectations from Calquence, Saphnelo, Breztriand Farxiga. This is largely driven by greater-than-anticipated market share gains and roll-out into new disease indications,” they said.

Shares traded 3% higher at 8,921p on Friday afternoon, having surged 20% in the year to date.


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