AstraZeneca slide puts investor focus on its drug pipeline

AstraZeneca’s rare clinical setback hit the stock harder than analysts’ valuation models suggested. For retail investors, the move shows how much of the drugmaker’s market value rests on confidence in future medicines, not just current sales.

The company’s late-stage trial of Wainua for ATTR cardiomyopathy, a rare and life-threatening heart disease, failed to meet expectations, CNBC reported. Late-stage trials are advanced human studies that often come before a company seeks regulatory approval, so a miss can remove a possible future revenue stream.

Shares fell 6.2% on Thursday, their worst session in more than two years, according to CNBC, and declined another 3% on Friday. Analysts said the direct hit to valuation models was smaller: Citi estimated an impact of about 3%, Jefferies put it near 2%, and Leerink Partners made a similarly limited cut to its price target. Bank of America described the sales effect as mid-single digit, while Morningstar said lower Wainua estimates did not meaningfully change its valuation.

Why the reaction looked bigger than Wainua

Wainua was not expected to be one of AstraZeneca’s largest products, according to analysts cited by CNBC. The surprise was that investors had viewed the program as likely to work, in part because Alnylam’s rival drug Amvuttra had shown favorable precedent with a similar approach, Goldman Sachs and Bank of America said.

That made the trial failure about more than one medicine. A drug pipeline is the set of treatments a company is developing, and AstraZeneca has long received a rich valuation among large European pharmaceutical companies because investors expect its pipeline to deliver. A valuation premium means the market is willing to pay more for each dollar of earnings or sales because it trusts the company’s future growth prospects.

Jefferies analysts wrote that the setback puts a dent in AstraZeneca’s credibility, even if it does not derail the company’s long-term story. The analysts said the result was expected to be a “slam dunk,” making the outright failure surprising.

AstraZeneca declined to comment further on the share price reaction, a spokesperson told CNBC.

The 2030 sales goal is now under more scrutiny

Dan Coatsworth, head of markets at AJ Bell, said in emailed comments that AstraZeneca has produced many more wins than losses recently, which has raised expectations. He pointed to the company’s plan to reach $80 billion in sales by 2030 and said investors will now question how credible that target is.

Analysts were mostly careful not to call the target broken. Jefferies said the failed Wainua study does not threaten management’s 2030 ambition, while Citi said it still expects AstraZeneca to exceed that goal. Leerink said that after speaking with management, removing Wainua in ATTR cardiomyopathy reduces the cushion above company-provided consensus from about $82.7 billion to about $80.8 billion, reflecting $1.9 billion in expected Wainua revenue in 2030.

Morningstar kept its fair value estimate unchanged and said the trial result does not change its view of AstraZeneca’s late-stage development capabilities. It also said the company’s oncology business, rare disease unit and wider pipeline remain intact.

More trial readouts are coming

The timing adds pressure. CNBC reported that AstraZeneca has several major pipeline events expected in coming months, including the AVANZAR lung cancer trial, SERENA-4 in breast cancer, and cliramitug in ATTR cardiomyopathy.

Jefferies called AVANZAR the next major event likely to shape investor sentiment, with data expected in July or August. Leerink said the Wainua setback puts more focus on the remaining “binary events,” a term analysts use for trial readouts that can sharply change the investment case depending on whether the data succeed or fail.

Citi reiterated AstraZeneca as its top European pharmaceutical pick, while Bank of America kept its Buy rating and Jefferies maintained a positive view, according to CNBC. The stock move, though, shows that investors may be demanding more proof before giving AstraZeneca the same benefit of the doubt.

This story draws on original reporting from CNBC.