ii view: AstraZeneca vaccine approved for use in UK

It has been a year like no other for this UK pharmaceutical giant. We assess prospects. 

Covid-19 vaccine authorised for emergency supply in the UK

Chief executive Pascal Soriot said:“Today is an important day for millions of people in the UK who will get access to this new vaccine. It has been shown to be effective, well-tolerated, simple to administer and is supplied by AstraZeneca at no profit. We would like to thank our many colleagues at AstraZeneca, Oxford University, the UK government and the tens of thousands of clinical trial participants.”

ii round-up:

Drug maker AstraZeneca (LSE:AZN) and the University of Oxford today received UK emergency supply approval for their jointly developed Covid-19 vaccine. 

AstraZeneca now plans to supply millions of doses of the non-profit vaccine in the first quarter of 2021 as part of its agreement with the UK government to supply up to 100 million doses in total. 

The authorisation of Astra’s vaccine follows the UK’s previous approval of the jointly developed Pfizer (NYSE:PFE)-BioNTech (NASDAQ:BNTX) vaccine. It has already been given to more than 500,000 of the UK’s most vulnerable citizens.

AstraZeneca shares rose by just under 1% in early UK trading leaving them little changed over 2020. Pfizer shares are down just over 5% year-to-date, while shares for Astra’s UK rival GlaxoSmithKline (LSE:GSK) are down over a fifth.

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The Astra vaccine can be stored, transported and handled at normal refrigerated conditions for at least six months and administered within existing healthcare settings, unlike the Pfizer-BioNtech vaccine.

Astra is working with its global partners to continue building manufacturing capacity of up to three billion doses of the vaccine globally in 2021 on a rolling basis, pending regulatory approvals. Additional safety and efficacy data for the vaccine will continue to accumulate from ongoing clinical trials. 

The UK vaccine approval follows its mid-December proposed $39 billion (£29 billion) purchase of US drugs company Alexion Pharmaceuticals (NASDAQ:ALXN). The potential acquisition would extend Astra’s own immunology drug portfolio while adding medicines for rare diseases. The acquisition is expected by management to be immediately core earnings accretive. Alexion revenues grew by 21% year-over-year to $5 billion in 2019.

ii view:

AstraZeneca is a global, science-led biopharmaceutical company. Oncology or cancer drugs at more than two-fifths of overall sales provide for its biggest segment. Cardiovascular, renal and metabolism compounds offer another area of strength, while its proposed purchase of Alexion would both strengthen its immunology and respiratory arena and add the treatment of rare diseases to its prospects. 

As for its Covid-19 vaccine, or AZD1222 compound, a significant boost to its global brand status is being achieved even if profits are not. That said, its little-known separate AZD7442 long-acting antibody Covid-19 therapy does have the potential to deliver a significant revenue boost of up to $3 billion (£2.25 billion) next year, according to recent research by broker Morgan Stanley.

For investors, time spent developing its coronavirus vaccine is time away from its core business, while only time will tell if the proposed purchase of Alexion lives up to the price being paid. 

But the successful roll-out of its Covid vaccine globally should help it develop relationships and potentially raise sales opportunities for its core business. The addition of rare disease treatments brings into focus more than 7,000 known conditions, of which only around 5% currently have US Food and Drug Administration-approved medicines. And a maintained dividend payment in recent years and an historic yield of over 2.5% is also not unattractive in the current era of ultra-low interest rates. In all, recent results and ongoing developments look to offer prospects for growth, with investors potentially still accumulating shares for the longer term. 

Positives: 

• Alexion adds to its diversity of drug treatments
• Attractive dividend

Negatives:

• Respiratory and immunology sales retreated by 12% in Q3
• Other medicine sales including those where patents have expired fell by 5% in Q3

The average rating of stock market analysts:

Buy