AZN share price forecast: Covid-19 impact continues

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How the AstraZeneca share price has been affected by the global vaccination roll-out

The AstraZeneca share price forecast has been dominated by the pharmaceutical company’s race to vaccinate the planet.

On Nasdaq, it reached a record high of $63.83 on 4 November 2021, the week before third-quarter results were published. That’s a 47% increase since the World Health Organisation declared a pandemic in March 2020, and 35% better than the 2021 low in early March. AZN traded around $60 at the time of writing.

There have also been concerns that the drug maker, which developed its Covid-19 jab in conjunction with the University of Oxford, was falling behind in the race for regulatory approvals and rush to fill orders. But, as the AstraZeneca stock forecast shows, this is a marathon not a sprint, and the market is shared by a multitude of firms.

Pfizer and Moderna, with their pioneering messenger RNA (mRNA) vaccines, have become dominant in western countries, especially the key US market. Although the AstraZeneca product, known by the trade name “Vaxzveria," is not approved for use in the US, it is manufactured for export at an Emergent BioSolutions factory in Baltimore.

Early on, AstraZeneca was the main jab for the job in the UK, though there have since been concerns about adverse reactions. The government’s official “yellow card” registry of adverse reaction reports said there were nearly 244,000 filed by early February due to the AstraZeneca jab, substantially more than the 165,000 from Pfizer’s shot.

Now, the companies are in a race to supply boosters to beat the Omicron variant. More about that later.

AstraZeneca share price news

We have come a long way since 2014, when Pfizer was making a concerted effort to take over AstraZeneca in a deal that would have been worth $118bn. The talks ended up falling through, and AZN fell by 13% at the time.

Fast-forward to 2022, and the AstraZeneca share forecast is benefitting from the ongoing race to vaccinate the world against Covid-19. At the end of the fiscal year, total revenue increased 41% to $47.4bn. That included $3.98bn from the vaccine.

By the end of 2021’s calendar, AstraZeneca and partners (mainly the Serum Institute of India) had supplied 2.5 billion doses to more than 170 countries. In February, however, Reuters reported on the shorter AZ shelf-life. Based on WHO documents, millions of doses had been wasted due to expiry and 250 million doses left factories too close to expiry.

In its fourth-quarter report, issued 10 February, AstraZeneca said total revenue $37.4bn was 38% higher. Including vaccine revenues in the fourth quarter, AZN earnings per share of $5.29 fell on the high end of the guidance, which was the range of $5.05 to $5.40.

Most recently, the big news has been December 2021’s US emergency use authorisation for the AstraZeneca Evusheld treatment, which was developed under the name AZD7442. It offers one-dose, pre-exposure protection for the immunocompromised, and is so far the only antibody authorised for use in such patients. Clinical trials found 77% effectiveness, but a more recent company analysis put the figure at more than 80%.

Mene Pangalos, AZN’s executive vice-president of biopharma research and development, told analysts that Evusheld had been authorised in 11 countries and more on the way:

“Evusheld remains the only antibody therapy authorized for the prevention of COVID-19 and multiple analyses by institutions such as the U.S. FDA and Washington University have shown that Evusheld retains neutralizing activity against the omicron variant. Similarly, several analyses published in recent months demonstrate Vaxzevria's ability to offer continued protection against COVID-19, including against the omicron variant”.

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The company told shareholders the fourth quarter sales were expected to be a combination of original pandemic agreements and new orders. Its limited profit contribution would offset the costs of developing Evusheld, resulting in no change to earnings per share guidance.

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AstraZeneca stock forecast: Challenges ahead

There were a few alarm bells in the news concerning the AstraZeneca share price forecast. One of them concerns reports that the jab was used sparingly in the booster campaign. Only 48,000 of the 37 million third doses given in the UK were from AZ, in favour of Moderna and Pfizer’s products.

In April and May 2021, the European Commission sued AstraZeneca AB in Brussels, claiming AZN failed to meet its supply obligations by the end of the second quarter. The court found AZN did not meet its best reasonable efforts obligation and ordered 50 million doses be provided by the end of September. The company exceeded that amount by the end of June. By September, the parties had reached an out-of-court settlement.

Away from the challenges associated with supplying hundreds of millions of doses in such a short timeframe, there has also been controversy over AstraZeneca’s pricing policy. According to the Financial Times, a confidential deal means that the company can, at its own discretion, add 20% on top of the cost of the goods used to make the jab.

That would appear to be at odds with the company’s assurance that it will sell the vaccine at cost during the pandemic, and only raise prices when the crisis eases. In response to the reports, AZN said that this was designed to cover costs related to the treatment’s distribution.

Overall, AstraZeneca managed to beat expectations the fourth quarter of 2021, with its diverse portfolio of medicines enabling the company to remain resilient during a challenging time for the sector.

Offering an update on the vaccine front, CEO Pascal Soriot said:

“We have quite a number of doses delivered to the U.S. government at a lower price in recognition for the funding of the development costs. So that's why in 2022, the margin on those products is not as high. But as we move forward, and we get to a stage where we are in a commercial world for Vaxzevria and we sell Evusheld at a sustainable price then, of course, profitability will increase”.

AstraZeneca shares: Buy or sell?

AstraZeneca PLC - USD
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65.8
Low: 65.7
High: 66.28

Companies such as AstraZeneca have faced a challenge during Covid-19. Despite the fact that they are investing billions of dollars of their own capital into finding treatments, being seen as taking profit risks a public relations disaster.

The encouraging thing for AZN lies is that it has an array of other treatments to fall back on, leading with the drug Tagrisso, a treatment for lung cancer which crossed the $5bn threshold in 2021.

According to CNN Money’s 12-month price forecast, 23 analysts forecast a median target of $68.02, with a $104.10 estimated high and $58.60 estimated low. AstraZeneca’s fundamentals are solid, according to analysts. Buy was the overwhelming consensus of 26 analysts — 21 said buy, three outperform and two hold. Nobody recommended to sell.

As the Omicron wave subsides, it is going to be a crucial few months for AstraZeneca, and the experiences of the past year-and-a-half could help usher in a new age where medicines and treatments are brought to market much more quickly than they have been in the past.

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