“No good deed goes unpunished.” It’s a saying that has been variously ascribed to screenwriter and director Billy Wilder, American banker Andrew Mellon and poet and playwright Oscar Wilde.
Whatever its origin it aptly sums up the travails of AstraZeneca PLC (LSE:AZN) since it teamed up with Oxford University to offer a Covid vaccine to the world at cost. It was a selfless act and one at odds with the received wisdom that drugs companies are driven by nothing more than the profit motive.
Yet, instead of being applauded, AZ has drawn the ire of the EU, while also finding itself the victim of an international whispering campaign that questioned the efficacy of its jab.
As the share price chart below reveals, investors have enjoyed something of a roller coaster ride as a result. In fact, what was designed to be a generous humanitarian act has proven to be a PR and IR disaster for the Anglo-Swedish giant.
It may not destroy (or even tarnish) the legacy of boss Pascal Soriot, but it has come to obscure the real value inherent in the AZ business; the gem that it is the cancer franchise.
That said, and now the vaccine debate has moved on, investors are starting to see the wood from the trees.
The stunning results from a phase III trial of its breast cancer drug Enhertu provided a timely reminder that the vaccine business is little more than a sideshow for AZ.
A Lazarus-like rise of 26% in the share price from its early March nadir might seem like progress, but it really only brings us back to where we were at the start of the year.
So, moving forward, what should be expected from AZ?
Well, according to the City’s bankers and brokers the stock, changing hands currently for just over GBP86, is worth around GBP99. Some of the punchier targets are closer to the GBP105-GBP110 range.
A total of 23 of the 27 analysts covering the stock are positive on AZ, with zero recommending clients sell the stock.
So, barring any self-inflicted wounds, the drugmaker should start playing catch-up on some of its more highly prized rivals.
At an operational level, there are some tough decisions to be made.
Change in the wind?
While chief executive Soriot has said he had no regrets over getting involved in vaccines, there is a growing recognition among execs that a rethink may be in order.
This was articulated not by Soriot, but by a key lieutenant, Ruud Dobber, head of the company’s biopharma division.
“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,” he told the Reuters news service in July. A team has been set to work to assess the options. “We need to have that discussion with our senior executive team, and then with the board of AstraZeneca.
We are exploring different options, but it is far too early at this stage to conclude that (process),” Dobbers explained. “Hopefully before the year ends, we will have a better view how to move forward.” Perhaps at the point AZ will have finally been forgiven for doing the right thing; taking a responsible course of action instead of being punished for it.
