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Will an expansion into rare diseases boost the AstraZeneca share price?

AstraZeneca share price: AstraZeneca vaccine

The AstraZeneca [AZN.L] share price has been falling in recent weeks, with some investors worried that the bull case for Covid-19 vaccine producers is weakening. But with positive upcoming earnings forecasts, the stock could get a shot in the arm when it reports fourth-quarter results on 10 February. 

According to Zacks Investment Research data, analysts expect Q4 2021 revenue of between $11.02bn and $11.28bn, with a consensus estimate of $11.15bn. This implies a 50% increase on the $7.41bn reported in Q4 2020. Earnings are also expected to rise 42.6% year-on-year to a consensus of $0.77 per share. 

Though the AstraZeneca share price has struggled despite healthy demand for Covid-19 vaccines, the company’s acquisition of rare disease specialist Alexion Pharmaceuticals could strengthen its position moving forward.

AstraZeneca share price dip outpaces rivals

The AstraZeneca stock price soared 21.8% in 2021 on the back of the global vaccination drive, but has fallen 3.8% year-to-date to 8,348p at the close on 7 February. Investors appear to be turning away from vaccine stocks in general amid expectations that demand will wane, even with the ongoing threat of Covid-19 variants.

In comparison to its competitors, the AstraZeneca share price has suffered a smaller decline so far this year, with shares in Pfizer [PFE] and Moderna [MRNA] down 9.2% and 36.9% year-to-date, respectively, as of 7 February. 

MarketBeat data shows that the AstraZeneca share price has a consensus ‘buy’ rating based on 14 analysts polled by the platform. The stock has a price target of 9,689.17p, which represents an upside of 16.1% from its 7 February closing price. 

Modest vaccine profits fail to lift AstraZeneca shares

When the British-Swedish biotech company reported its Q3 numbers in November last year, total revenue came in just ahead of expectations at $9.87bn. However, the company’s earnings of $0.54 per share missed estimates. 

Sales of its Covid-19 vaccine accounted for $1.05bn of revenue and added only $0.01 to earnings. However, AstraZeneca CEO Pascal Soriot was optimistic about the future of the vaccine. “The Covid assets are delivering no profit, overall, but the good news is we’re moving progressively into a profitable mode for the vaccine,” he said on the Q3 earnings call. “It will always be a modest profitability, but it will be profitable.”

Despite the earnings beat, investors were disappointed. The AstraZeneca share price fell around 5% in the hours following the earnings call on 12 November and has struggled for momentum since. As of 7 February, the AstraZeneca share price is down 13% from the 11 November closing price of 9,444p.

Rare disease research could broaden revenue stream

In response to the Q3 earnings, analysts at Hargreaves Lansdown noted that it’s unclear how much of an impact the vaccine will have on the company’s profitability in 2022. “Instead, the real focus this year is the acquisition of Alexion, which was completed in mid-July and is the pharmaceutical giant’s largest-ever deal,” they wrote. 

The integration of the $39bn Alexion deal resulted in a 20% year-on-year increase in operating expenses during the previous quarter. This significant rise saw the company slip to a loss of $2bn. But while the deal has added to AstraZeneca’s debt in the near term, the Hargreaves Lansdown analysts note that it should strengthen its cash generation.

The Q4 earnings call should give investors an insight into how the Alexion pipeline is lining up. It also inked a $3.1bn deal with Ionis at the end of the quarter in early December to develop and commercialise its drug Eplontersen. The drug can be used to treat the rare disease transthyretin amyloidosis (ATTR). The agreement was closed on 29 December. 

More deals like this will be crucial catalysts for the company. In January, it announced another deal to gain global rights for Neurimmune’s NI006, a drug used for cardiomyopathy (which some ATTR patients suffer from). AstraZeneca will pay $30m upfront, with a further $730m based on milestone targets.  

On track to meet 2021 guidance 

With regard to full-year 2021 revenue, AstraZeneca said on its Q3 earnings call that it was on track to meet its revenue guidance of $36.2bn, given that it had already amassed $25.4bn during the first nine months. Earnings are forecast to be between $5.05 and $5.40 per share.

Looking ahead, the Hargreaves Lansdown analysts commented that it’s too early to tell whether the Alexion deal will deliver on its promises. But “the acquisition could underpin future growth and cash flows. If all goes to plan, the future is bright”.

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