Barclays upgrades AstraZeneca on attractive growth outlook

Barclays upgraded AstraZeneca to ‘equalweight’ from ‘underweight’ and lifted the price target to 5,000p from 4,400p following a review of the pipeline and the recent Acerta Pharma and ZS Pharma deals.

It said the upgrade reflected “an attractive growth outlook balanced by the potential for downside risk to consensus estimates in the near term and increasing optionality moving into the 2017 ‘crunch year’ for oncology”.

After a full pipeline review and following the recently announced deals including the majority stake investment in Acerta Pharma and the acquisition of ZS Pharma, the bank lifted its 2020 revenue estimates by 20%.

It now expects the group to deliver 6% top-line and 13% bottom-line growth between 2017 and 2023.

Still, it said the promise of AZN’s burgeoning pipeline must be tempered against an ever more challenging competitor and payor environment for its diabetes and respiratory franchises.

“In our view consensus remains too bullish on pipeline expectations, with a changing commercial risk environment in the US and the potential for delays to approval timelines. Our 2020E revenue and earnings per share estimates are 6% and 9% below AZN-compiled consensus, respectively.”

In addition, it pointed out that AstraZeneca also needs to deal with the loss of patent protection for Nexium, Crestor and Seroquel XR, which account for around $7bn of sales.

At 0930 GMT, AZN shares were up 1.9% to 4,292p.