While we remain bullish on Astra's prospects in immuno-oncology, we're concerned about the heavy patent losses facing the wide-moat firm.
reported positive progression-free survival data in lung cancer for its immuno-oncology drug Imfinzi in line with our expectations, and we don’t expect any major changes to our fair value estimate and moat rating based on the results. While we remain bullish on Astra’s prospects in immuno-oncology, we're concerned about the heavy patent losses facing the firm. We continue to view the stock as largely fairly valued, with a solid pipeline offsetting generic competition and supporting the wide moat.
Damien Conover, CFA, is director of healthcare equity research and equity strategy for Morningstar.
In the positive lung cancer study, Pacific, Astra’s Imfinzi showed a significant improvement in progression-free survival, which should lead to better overall survival, but that data is not likely to be ready until 2019. The unique patient population in the study (nonmetastatic Stage III non-small-cell lung cancer with unresectable tumors) represents close to 47,000 patients in the primary developed markets. At an annual price point of close to $150,000, the opportunity represents well over $1 billion. Further, with competitive drugs not likely to officially enter this segment of the market for at least two years, Astra has time to establish Imfinzi in the market. However, we expect some usage of Merck’s Keytruda may compete in the market, given the success the drug has shown in the metastatic lung cancer patient population.
Overall, the data supports our $2.5 billion sales estimate for Imfinzi by 2021, which is slightly higher than consensus expectations. However, based on the Pacific data, we expect consensus projections will rise. Additionally, we remain positive on Astra’s next major immuno-oncology study, Mystic, which should report in mid-2017.
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