HSBC lifts AstraZeneca target price on haematological cancer forecasts

AstraZeneca revealed it had agreed to acquire a 55% stake in privately-owned Acerta for $2.5bn, with another $1.5bn due upon approval by the US of the take-over target's lead cancer drug acalabrutinib or by end-2018, whichever was soonest.

With Acerta's owners having the option to sell the remaining stake to the FTSE 100 company for $3bn, the broker said it assumed this would occur in 2018, as it saw no rationale for the option to be exercised sooner rather than later.

Acalabrutinib, aka ACP-196, could prove to be "best-in-class" monotherapy, the bank said.

Phase II clinical data and ongoing phase III trials also meant that acalabrutinib was likely to be very competitive versus Johnson & Johnson and AbbVie's Imbruvica, currently the only drug on the market that inhibits the BTK enzyme and can treat haematological cancers.

Shift towards combination therapies justifies price tag

AstraZeneca has already signed a wide-ranging collaboration with Celgene to jointly develop immuno-oncology treatments for haematological cancers.

Hence, "were the standard of care in some haematological cancers to move to the combination of a BTK inhibitor (such as acalabrutinib) and an anti-PDL1 (such as AstraZeneca’s durvalumab), then by acquiring Acerta, AstraZeneca would gain two thirds of the overall economics of the combination (versus 30-50% of durvalumab monotherapy)," the analysts wrote.

"In our view, that helps justify the potential $7bn price tag for acquiring a company whose main asset has not yet been approved, not even completed phase III development."

Despite including revenues from this and other recent acquisitions, 2023 revenue forecasts of circa $37bn were still around $8bn shy of AstraZeneca’s 2023 target announced during the failed Pfizer bid process, the analysts noted, though this was increasingly likely to be seen as an aspirational target that diminishes in relevance through time.

AZN's target price was lifted to 4,910p from the previous 4,770p, with a 'buy' rating reiterated.