AstraZeneca plc.’s AZN stock has rallied 11.9% this year so far, outperforming the industry’s rise of 3.7%.
The company’s outperformance has been backed by quite a few positive developments on the regulatory and pipeline front, a strong performance of its relatively newer drugs as well as a bullish outlook for 2019.
New Drugs Push Return to Growth
Newer drugs like Brilinta (cardiovascular), Lynparza (ovarian cancer), Farxiga/Forxiga (type II diabetes) and Tagrisso (lung cancer) are driving top-line growth, with AstraZeneca launching them in more markets and in an increased number of indications. AstraZeneca expects Tagrisso to become its biggest medicine in 2019. Brilinta and Farxiga achieved blockbuster status in 2017, exceeding $1 billion in sales. Imfinzi and Fasenra, launched in 2017/early 2018, are off to a strong start, given their highly competitive clinical profile. AstraZeneca is looking for further label expansions for these drugs.
The company returned to product sales growth in the second half of 2018 on the back of its newer drugs after patent expirations persistently hurt its product sales growth since 2010. Sales of AstraZeneca’s newer medicines rose 81% in 2018 as almost every new product it has launched in recent years has done well. The company is confident of seeing a sustained uptick for several years driven by sales growth of its new medicines, namely Tagrisso, Imfinzi, Lynparza, Farxiga and Fasenra.
Positive Pipeline Developments
AstraZeneca delivered well on its R&D pipeline with meaningful data readouts and regulatory updates announced in 2018.
Last year’s new drug approvals included Lokelma (hyperkalemia) in the United States as well as the EU, Lumoxiti (third line hairy cell leukemia) in the United States and roxadustat for anaemia in chronic kidney disease patients on dialysis in China. Moreover, new asthma medicine, Fasenra (benralizumab), was approved in Japan and the EU. Fasenra got the FDA nod in November 2017 and is fast becoming a key contributor to the company’s sales.
Key approvals for line extensions of new cancer drugs in 2018 included Imfinzi for an early stage lung cancer, Lynparza for breast cancer in the United States and Japan as well as in first-line maintenance setting for ovarian cancer in the United States and Tagrisso in first-line EGFR-mutated NSCLC in both the United States and the EU. These label expansions significantly aided sales growth of these important cancer drugs in the second half of 2018 with the momentum likely to continue in 2019 as well. Notably, AstraZeneca markets Lynparza in partnership with Merck MRK.
Meanwhile, a new formulation of AstraZeneca’s diabetes medicine, Bydureon, in an improved once-weekly, single-dose pre-filled BCise device was also approved in the United States and the EU last year.
Several product introductions are underway for AstraZeneca across each of the therapeutic areas - Oncology, CV metabolism and Respiratory. AstraZeneca hopes to launch four respiratory medicines between 2017 and 2020 with Fasenra and Bavespi already launched. In oncology, AstraZeneca’s target is to launch at least six new medicines between 2014 and 2020 with Lynparza, Tagrisso, Imfinzi and Calquence already hitting the market. An interesting candidate in the company’s immuno-oncology pipeline is Imfinzi (durvalumab), which is being evaluated for multiple cancers, either alone or in combination with other regimens.
Meanwhile, several pipeline and regulatory events are scheduled for 2019. This includes NDA filing for investigational triple combination therapy PT010 for COPD and for roxadustat in the United States apart from data readout on Calquence in first-line chronic lymphocytic leukemia.
AstraZeneca, which carries a Zacks Rank #2 (Buy), has its share of challenges. These include generic competition for its core products, stiff competition in its diabetes franchise and pricing pressure on its respiratory franchise. However, we believe, the company’s newer drugs, upcoming product launches, aggressive cost-cutting efforts and a promising late-stage pipeline should keep the stock afloat in 2019.
Other better-ranked large drug/biotech stocks include Bayer Aktiengesellschaft BAYRY and Celgene Corporation CELG, both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Celgene’s earnings estimates have been inched 0.4% up for 2019 and 1.1% for 2020 over the past 30 days. The stock has surged 38% year to date.
Shares of Bayer have increased 8.7% year to date.
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