As I write, the best performing FTSE 100 stock today is AstraZeneca (LSE:AZN). It currently trades at 8,808p, up just over 5% on the day. The bump comes after the company released successful Phase 3 trial results for a treatment for prostrate cancer. With AstraZeneca shares up 12% over the past year and recent full-year results showing good growth, I think more upside is on the horizon.
Drug and full-year financial results
The short-term rally comes following news that the combination of the Lynparza drug with hormone therapy can delay disease progression by several months. This could have a large commercial use for prostrate cancer going forward.
Any new drug that solves for or can help lessen the impact of a disease is going to be a positive for a large pharmaceutical company. Some banking analysts think that this particular breakthrough could have revenue implications of several billion pounds.
This good news comes only a week or so after the release of full-year results for 2021. In it, total revenue increased 41% year-on-year when including Covid-19 vaccine revenue. Even excluding this, revenue rose by 26%.
Some of this growth was driven by the acquisition and integration of Alexion, but even so, it’s a strong performance. The report noted “double digit growth across all regions”.
Earnings per share (EPS) was down heavily versus last year, but there were valid reasons for this. For example, higher expenses due to investment in its R&D pipeline, along with one-off integration costs with Alexion.
AstraZeneca shares can move higher from here
The results might be in the recent past, but I think the AstraZeneca shares have the impetus to keep going from current levels. One major reason for this is the positive outlook. For the full-year 2022, the business expects “core EPS… to increase by a mid-to-high twenties percentage”. Part of the driver behind this is new Phase 3 rollouts of new medicines, such as the one in the news today.
I do acknowledge that the revenue benefit from Covid-19 vaccines is likely to diminish in 2022 and beyond. Yet there are two aspects to consider here.
Firstly, the virus mutates. Therefore I imagine that several booster jabs will be required, or even an updated general vaccine in the future. Secondly, as shown by the 2021 numbers, the vaccine revenue isn’t make-or-break on the financials for AstraZeneca. It was a profitable business before the pandemic and I think will continue that way going forward.
I think one of the risks for AstraZeneca shares going forward is the comprehensive review that is expected to run through to 2025. In the long term, I think this is good, but over the next year or so it could be tough. This could include high restructuring costs, potential redundancies, and other headlines that could sting in the short term.
Personally, I’m thinking of buying AstraZeneca shares now despite the risks. A strong financial outlook and a good pipeline of medicines should help support an upward move in the share price.
