Jefferies upgrades AstraZeneca to 'buy'

Jefferies upgraded AstraZeneca to ‘buy’ from ‘hold’ and lifted the price target to 5,800p from 5,400p saying it sees a much higher probability of success and larger market opportunity from the MYSTIC study than consensus implies.

The MYSTIC study is a global, phase 3 study of the combination of the anti-PD-L1 drug durvalumab and anti CTLA-4 drug tremelimumab in first-line lung cancer.

“We see positive asymmetry on the outcome of MYSTIC, which we expect any time from February 2017. We see around 39% upside if MYSTIC meets our expectations against 10% downside if the entire durva/ treme opportunity in non-small cell lung cancer (NSCLC) is removed.

“We strongly challenge the consensus that AZN should hold only 6% of the PD-1/ L1 market by 2020E.”

Jefferies pointed out the market is bearish on the probability and potential of MYSTIC with just $1.2bn for durvalumab versus the banks’ consensus of $3.3bn and $368m for tremelimumab in consensus by 2020E versus its estimate of $1.7bn.

“We estimate that MYSTIC could drive a combined peak revenue opportunity for durvalumab and tremelimumab of around $7.9bn in NSCLC, with additional revenues potentially coming later from other combinations as well as adjuvant NSCLC treatment.”

AstraZeneca shares closed up 1.1% at 4,870.59p on Friday.