Berenberg slightly lowers target price on AstraZeneca

Berenberg said AstraZeneca's third-quarter results disappointed the market, with shares underperforming its peer group following their publication, down 12% versus large pharma's 4% decline.

The German bank, which also reiterated its 'buy' rating on the stock, said Astra's results were obfuscated by its Covid-19 vaccine profit and loss statement and the first-time inclusion of newly acquired pharmaceutical business Alexion. It also noted that Tagrisso sales missed due to a China price cut to accommodate more volume and full-year 2021 guidance was only reiterated.

As a result, Berenberg updated its model after time spent with the AZN's chief financial officer and its head of BioPharmaceuticals research and development.

"We lower our sales forecasts by 1% and lower our EPS forecasts by 2-4% to reflect increased R&D spend, which puts pressure on margins," said the analysts.

"Berenberg profit forecasts are below consensus. However, our Return on R&D Investment (RORI) analysis supports management's plans to reinvest in the pipeline as AstraZeneca generates a historical and predicted return above the cost of capital."