UBS has lifted its price target on AstraZeneca (LON:AZN), arguing that sales of its oncology treatment Tagrisso look like they will beat expectations over the coming years, Proactive Investors reports. The comments come after Liberum reaffirmed the Anglo-Swedish drugmaker as a ‘hold’ last week, noting that the pharmco’s current share price is fair given the potential of the group’s pipeline.
AstraZeneca’s share price has climbed into positive territory in today’s session, having added 0.50 percent to 5,227.00p as of 09:42 BST. The advance is largely in line with gains in the broader UK market, with the benchmark FTSE 100 index currently standing 0.43 percent higher at 7,542.10 points. The group’s shares have lost nearly four percent of their value over the past year, as compared with about a 1.3-percent gain in the Footsie.
UBS lifts valuation on AstraZeneca
UBS lifted its price target on AstraZeneca from 4,550p to 5,600p yesterday while maintaining its ‘hold’ rating on the shares, arguing that the current consensus for sales of the pharmco’s lung cancer drug Tagrisso are too low. The treatment was approved by US and European regulators last year.
“We forecast US and global Tagrisso sales of $2.5 billion and $5.8 billion in 2023; 47 percent and 41 percent ahead of recent company collated consensus, respectively,” the broker’s analyst Jack Scannell said in a research note, as quoted by Proactive Investors.
Externalisation revenue concerns
The analysts, however, have flagged concerns over the pharmco’s externalisation revenue, with the Anglo-Swedish drugmaker offloading the rights to some of its non-core assets for an upfront fee.
UBS noted that its second analysis which looked at AstraZeneca’s externalisation revenue and other operating income suggested “that consensus underestimates the future profits that are forgone when Astra trades them for up-front payments”.
The analysts nevertheless reckon that the better-than-expected Tagrisso sales should more than even out the drag on future profits by externalisation deals.