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AstraZeneca (LON:AZN) Setbacks Don't Stop This Company's Comeback

Monday, October 12, 2020 | Steve Anderson
AstraZeneca (LON:AZN) Setbacks Dont Stop This Companys Comeback

Admittedly, things weren't looking good for AstraZeneca (LON:AZN) for a while there. With good reason, too; its vaccine trials were stopped dead in their tracks when some truly disastrous side effects started showing up, and that might well have knocked the company out of the COVID-19 recovery stakes for good. However, a new development has emerged to give AstraZeneca some extra firepower, and this could in turn give the company an edge.

There's More to Fighting COVID-19 Than Just Vaccines

While most out there focus on the concept of a COVID-19 vaccine, there's another point that gets a lot less attention: therapeutics. In fact, for the most part, therapeutics end up dismissed, shoved to the side, or outright derided in the face of a push for a vaccine. Hydroxychloroquine—even when backed up by azithromycin and zinc—was brutally hit despite around 70 years of regular use suggesting its safety, and even after President Trump came down with the disease and recovered in a matter of days on Regeneron Pharmaceuticals (NASDAQ:REGN)'s therapy, even the CEO was out suggesting that a lot more research needed to be done despite the clear success.

That's what makes AstraZeneca's latest development so worthwhile; it's just landed a $486 million deal with the US government—specifically the Biomedical Advanced Research and Development Authority (BARDA)—in a bid to develop and produce an “antibody cocktail” known currently as AZD7442, which is said to be extremely similar to Regeneron's. For its investment, BARDA gets access to 100,000 doses of the completed drug, and the option to purchase another million starting next year.

The cocktail in question is set to go into Phase 3 testing, which is where AstraZeneca got the last time before the pronounced side effects kicked in. In fact, the company has two separate Phase 3 trials set up, including one to measure the ability to prevent COVID-19 infections at the outset, and the other to measure the ability to treat the disease to prevent symptoms from even showing up, where symptoms actually might have shown up.

An Uncertain Analyst Picture

The news comes at a good time for AstraZeneca, which had not only suffered the setbacks of Phase 3 trials that certainly didn't go according to plan, but also in the face of a declining picture with both analysts and investors.

Currently, our latest research finds that AstraZeneca is sitting at a “hold” rating overall, with six “sell” ratings and 11 “buy” ratings combining to average out into a “hold”, joining just two analysts who actually put a “hold” rating on the stock. However, with JPMorgan Chase & Co. joining the ratings fray just last Thursday at a “buy”, it's clear that the most recent sentiment is swinging around to AstraZeneca's favor, as “buy” ratings were reiterated, and several analysts set price targets while not changing “buy” ratings. Granted, Goldman Sachs and UBS Group maintained “sell” ratings while establishing price targets, but there was a surprisingly bullish sentiment running in the latest batch of ratings.

When Lagging a Market Actually Doesn't Matter Much

It would be easy to dismiss AstraZeneca here; its vaccine effort has mostly fizzled, and there are some disturbing signs that the Food and Drug Administration may be playing politics, slow-walking AstraZeneca trials in favor of local candidates. Even the deal to get more cash into therapeutic development isn't a great deal, as there are other candidates ahead like those from Regeneron and Eli Lilly (NYSE:LLY). Yet in this case, not having the first-mover advantage isn't so bad.

One thing that's become surprisingly clear over the last few months is that, even if a company gets first-mover advantage in vaccines or therapeutics for fighting the coronavirus, that company can't possibly make enough to meet inevitable demand. Thus, there's room here for several companies to step in, since it's going to take several production lines working full-tilt to meet that demand. If you've got a market of 300 million people, and you can maybe make enough to meet 10% of that demand, there's room for nine other companies to step in at similar rates and no one will ever step on anyone else's toes. Sure, down the line, as production methods improve there might be some room to fight for additional market share, but by then, the demand for the product may decline anyway.

AstraZeneca may have had some reversals in recent days, but it's making its comeback clear. When you throw in the rest of the company's drug portfolio, that's just one more point in its favor and one to make AstraZeneca worth another look.

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Regeneron Pharmaceuticals (REGN)2.6$517.17+2.0%N/A18.90Buy$656.38
Compare These Stocks  Add These Stocks to My Watchlist 

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