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AstraZeneca (LSE:AZN) experienced a decline of £4 billion in its market value following a downgrade from Deutsche Bank, which has revised its recommendation for the company to 'sell' in light of the latest update on the lung cancer drug datopotamab.
Deutsche Bank had previously lowered its projections for the drug, but the recent update on biomarker data has reinforced its concerns and introduced additional issues. The bank highlighted that while datopotamab is not the sole significant prospect in AstraZeneca’s pipeline, it is a crucial component of the company's revenue forecasts for the latter half of the 2020s. The updated information raises questions about the drug’s potential impact on these projections.
Deutsche Bank also noted that upcoming events, including a challenging December Adcom/PDUFA review and potential downside risks for fiscal year 2025 guidance, coupled with key catalysts scheduled for the latter half of 2025, have created a challenging risk-reward scenario for AstraZeneca. The bank’s revised forecasts are substantially lower than both mid-term consensus estimates and the company's own guidance, a disparity that is not reflected in the current valuation, which stands at 19 times the projected price-to-earnings ratio for fiscal year 2025.
The bank’s downgrade to 'sell' from a previous 'hold' rating comes with a reduced target price of 10,500p. This adjustment reflects the bank’s assessment of increased risks and uncertainties surrounding AstraZeneca’s future performance, particularly concerning the datopotamab drug and its implications for the company’s revenue and overall valuation.
