AstraZeneca: Should Investors Focus on Vaccine Concerns or Longer-Term Growth Prospects?
In recent weeks, AstraZeneca (AZN) has been in the news because of the continued struggles that the COVID-19 Vaccine that the company developed alongside Scientists for Oxford University has faced. When the Moderna (MRNA) and Pfizer (PFE) vaccine data was first published, the companies were boasting efficacy in the mid-90’s. And, as a March 29th report filed by the U.S. Center for Disease Control and Prevention (CDC) noted, in “real-world conditions” the authorized mRNA vaccines (both Pfizer’s and Moderna’s fall under this category) offer 90% protection from COVID-19, after 14 days of the second vaccine shot, regardless of symptom status. The CDC note says that the mRNA vaccines provide 80% protection 14 days after the first dose.
Johnson and Johnson’s (JNJ) COVID-19 vaccine has also received emergency use authorization in the U.S., Europe, and for international purposes by the World Health Organization. JNJ’s phase 3 study “demonstrated the vaccine was 85 percent effective in preventing severe disease across all regions studied.” JNJ’s data also highlighted the fact that there was not a single hospitalization or death amongst those in the vaccine arm of the trial.
So, while JNJ’s numbers may not be quite as impressive as PFE’s or MRNA’s, healthcare officials still deem the single-shot vaccine (which is also much easier to store and transport due to higher temperature requirements) to be safe and effect, especially when it comes to fighting severe COVID-19 infections.
AstraZeneca, on the other hand, has yet to receive emergency use authorization in the U.S. and the company’s vaccine has seen ongoing issues in the areas of the world where it is being put to use. On March 22, AZN posted results of a recent U.S. trial. Rebecca Urena of Financial Buzz broke down the results in a recent article, highlighting results which showed that the drug was 79% effective in preventing the COVID-19 virus and 100% effective at combating severe COVID-19 infections.
In her article, Urena reported that Ruud Dobber, executive vice president of AstraZeneca’s biopharmaceuticals business unit, said, ““We are thrilled by the results we have disclosed this morning.” Urena’s piece also notes that the company said that an independent committee “found no increased risk of thrombosis or events characterized by thrombosis among the 21,583 participants receiving at least one dose of the vaccine.”
While AZN’s results still lag behind MRNA’s and PFE’s effectiveness, these new AZN results appeared to point towards a fourth COVID-19 vaccine potentially being approved in the United States. However, the next days, news broke that these results were comprised of interim data, causing investors and analysts alike to question the likelihood of the company’s vaccine approval.
Brain Orelli, a 5-star rated Nobias analyst who writes for The Motley Fool summed these struggles succinctly in a recent article titled, AstraZeneca's Vaccine Data May Not Be as Good as It First Appeared, saying, “The drama surrounding AstraZeneca's (AZN) coronavirus vaccine seems to be never-ending.” He noted that there have been dosing issues throughout the trial period, confusing reports of data from multiple clinical trials, and now, there appears to be concerns that the company released interim data from a trial that has yet to be completed.
Orelli said, “The National Institutes of Health's National Institute of Allergy and Infectious Diseases (NIAID) reported on Tuesday that it had been told by the Data and Safety Monitoring Board (DSMB) for AstraZeneca's U.S. clinical trial that the board "expressed concern that AstraZeneca may have included outdated information from that trial, which may have provided an incomplete view of the efficacy data." He added, “Following NIAID's announcement, AstraZeneca noted that the results disclosed on Monday were from a pre-specified interim analysis of data that was cut off as of Feb. 17. The data showed the vaccine had 79% efficacy at preventing symptomatic COVID-19 and 100% efficacy at preventing severe disease and hospitalization.”
AZN says that the data from the full data set associated with its study is “consistent with the interim analysis"; however, the company’s vaccine has yet to receive emergency authorization in the United States. Sarah Smith, another 5-star Nobias analyst from Investor Place recently wrote a piece which highlighted other concerns from AZN’s vaccine, saying, “Over the last several days, reports of blood clots is AstraZeneca vaccine recipients have raised concerns.”
Smith highlighted the fact that a the top healthcare agency in Europe continues to see limited (and acceptable) risk, with the European Medicines Agency publishing a March 18th report titled, “COVID-19 Vaccine AstraZeneca: benefits still outweigh the risks despite possible link to rare blood clots with low blood platelets”. She also notes that “European lawmakers have embarked on a public relations campaign to boost the image of AstraZeneca and highlight political leaders who have received the shot.”
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
At this point in time, it’s unclear as to whether or not the AZN vaccine, which has garnered most of the stock’s recent headlines, will receive approval. However, it’s important to remember that this company has a $131 billion market cap and generated more than $26.6 billion in sales during 2020, meaning that the vaccine has a relatively small impact on the stock’s growth prospects and valuation moving forward.
With this in mind, even though the recent analysis/publications that Nobias tracks from 4 and 5 star analyst have trended bearish (during the month of March we’ve seen 45 bearish reports, 1 neutral report, and 20 bullish reports) the company’s growth prospects still look attractive.
Although AZN went through a growth slump throughout the prior decade (posting a -6.32% earnings-per-share growth CAGR from 2010-2019), in 2020, the company’s bottom-line saw a nice boost. In 2020, AZN’s EPS grew by 15%. Right now, the consensus analyst estimate for earnings-per-share in 2021 and 2022 is 28% and in 2023, that double digit growth trajectory is expected to stay in place, with a consensus EPS growth estimate of 17%.
Today, AstraZeneca trades with a blended price-to-earnings ratio of 23.8x, which means that shares are more expensive than many of the company’s big-pharma peers’. However, if analysts are correct and the company posts strong double digit earnings over the medium-term, AZN’s forward multiple becomes much more attractive. At $50.81/share, AZN is trading for 19.7x the current 2021 EPS $2.57. Shares are trading for just 15.4x 2022 estimates and 13.3x 2023 consensus estimates.
Obviously no one can know whether or not the company will meet the market’s expectations; however, if it does, then today’s valuation could present an attractive investment opportunity, despite the recent vaccine concerns.
Disclosure: Nicholas Ward has a long position in JNJ and PFE. Nicholas Ward wrote this article for Nobias at their request with a view of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
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