AstraZeneca Plc - Modest Benefit from COVID-19 Vaccine

AstraZeneca Plc (LON: AZN) is a FTSE 100 listed science-led biopharmaceutical Company.

Recent News

On 18 August 2020, the Company stated that the Imfinzi has been accepted for the supplemental biologics license applications by FDA (Food & Drug Administration) and has been granted a priority review for a less-frequent dose regiment for the treatment of (NSCLC) non-small cell lung cancer and bladder cancer.

On 14 August 2020, it has concluded an agreement with the EC (European Commission) for supplying up to 400 million doses of the AZD1222 COVID-19 vaccine.

Financial Highlights - H1 FY20 (for the six months ended 30 June 2020, as on 30 July 2020)


(Source: Company Website)

Led by the improved performance of new medicines business, growth across therapy areas and regional growth for the period, the total revenue surged by 12% year-on-year on AER basis to US$12,629 million in H1 FY20. The operating profit increased by 57% year-on-year on AER basis to US$2,504 million in H1 FY20, reflecting controlled operating expenses and higher revenue. The Company witnessed a strong balance sheet, with a cash balance of US$5,673 million as on 30 June 2020.

Share Price Performance


1-Year Chart as of 19 August 2020, before the market close (Source: Refinitiv, Thomson Reuters)

AstraZeneca Plc’s shares were trading at GBX 8,599.00 on 19 August 2020 (before the market close at 11:14 AM GMT+1), up by 1.26% against the last day closing price. Stock 52 week High and Low were GBX 10,120.00 and GBX 5,871.00, respectively.

From the technical standpoint, shares were trading slightly above the short-term support level of 100-day simple moving average price, which reflects an uptrend in the stock and carrying the potential to move up further.

Key Risks

The Company is also exposed to commercialisation risks such as competitive pressures, affordability, pricing and delays or failure in quality execution of commercial strategies. Further, the Covid-19 pandemic can cause a significant delay in the delivery of pipeline and new medicines.

Conclusion

In FY20, total revenue is projected to surge by a high single-digit to a low double-digit percentage, while EPS should increase by a mid to high-teens percentage. Recently, Australia has signed a letter of intent with AstraZeneca for potential Oxford COVID-19 vaccine. Overall, the full-year guidance is supported by exciting new medicines pipeline and focused commercial execution.

Considering the strong pipeline, global presence, improving financials, and market dynamics, we are currently maintaining the “Hold” stance on AstraZeneca at the current market price of GBX 8,599.00 (as on 19 August 2020, before the market close at 11:14 AM GMT+1) and will recommend fresh buying at the right time.

GlaxoSmithKline Plc - Maintaining Good Momentum and Fundamentals Remain Strong

GlaxoSmithKline Plc (LON: GSK) is a FTSE 100 listed multinational Healthcare Company.

On 28 October 2020, the Company will announce the Q3 FY2020 results.

Recent News

On 17 August 2020, the Company stated that it is the first participant vaccinated in phase III clinical trials of 5-in-1 meningitis (MenABCWY) vaccine candidate.

On 6 August 2020, the US FDA has approved BLENREP (belantamab mafodotin-blmf), GSK drug for the treatment of patients with relapsed or refractory multiple myeloma. It is the fifth major medicine approval in 2020.

Q2 FY20 Trading Update (for the three months ended 30 June 2020, as on 29 July 2020)

 
(Source: Company Website)

For the second quarter of 2020, the revenue decreased by 2% year-on-year (on AER basis) to £7.62 billion, but quarterly profit before tax more than doubled to £2.64 billion. In the first half of 2020, the Company’s revenue increased by 8% year-on-year to £16.71 billion. The total EPS increased to 45.5 pence in Q2 FY2020 (Q2 FY19: 19.5 pence), reflecting profit on disposal of Horlicks and other Consumer Healthcare brands.

Share Price Performance


1-Year Chart as of 19 August 2020, before the market close (Source: Refinitiv, Thomson Reuters)

GlaxoSmithKline Plc’s shares were trading at GBX 1,546.60 on 19 August 2020 (before the market close at 11:20 AM GMT+1), up by 0.49% against the last day closing price. Stock 52 week High and Low were GBX 1,857.00 and GBX 1,328.19, respectively.

From the technical standpoint, 14-day RSI is currently close to an oversold zone, which means there is a good potential for a short term rebound in the stock price.

Key Risks

The Company operates in a highly competitive environment and changing digital landscape can increase the pricing pressure.Global political uncertainty regarding trade policy also poses a risk for the group.

Valuation Methodology 
 


Conclusion
The Company has entered into two agreements in the past months for the coronavirus vaccine development, first with Medicago of Canada and the second with Sanofi. It (Sanofi and GSK) is in advanced discussions with the EC for the supply of up to 300 million doses of a COVID-19 vaccine. Also, the Company is entering the final stage of clinical trials with the 5-in-1, MenABCWY vaccine. Looking ahead, Glaxo maintained the guidance of annual adjusted earnings per share falling between 1% to 4% at constant currency.Overall, the Company is maintaining good momentum on the strategic priorities, and the fundamentals of GSK’s business stay strong.

Considering the good underlying demand,entered the final stage of clinical trials and support from the valuation as done using the above method, we have given a “BUY” stance on GlaxoSmithKline at the current market price of GBX 1,546.60 (as on 19 August 2020, before the market close at 11.20 AM GMT+1), with lower double-digit upside potential based on 15.00x Price/NTM Earnings (approx.) on FY20E earnings per share (approx.).

Synairgen Plc - Positive Results from the Trial of SNG001

Synairgen Plc (LON: SNG) is an FTSE AIM All-Share listed Company, which is involved in drug discovery and development of therapies for respiratory diseases.

Financial Highlights - FY2019 (for the year ended 31 December 2019, as on 26 May 2020)


(Source: Company Website)

Led by an increase in the operating expenses for the period, the Group reported an operating loss of £4.82 million in the financial year 2019 (FY18: loss of £4.13 million). The LBT (loss before tax) stood at £4.79 million in FY2019 (FY18: loss of £4.10 million). On 31 December 2019, the net assets amounted to £2.25 million (FY18: £6.03 million), comprising cash and bank deposits of £2.45 million (FY18: £5.33 million). In March 2020, the Company had raised £14 million through equity issuance to strengthen the position for COVID-19 related activities.

Share Price Performance

 

1-Year Chart as of 19 August 2020, before the market close (Source: Refinitiv, Thomson Reuters)

Synairgen Plc’s shares were trading at GBX 250.00 on 19 August 2020 (before the market close at 1:28 PM GMT+1), up by 4.17% against the last day closing price. Stock 52 week High and Low were GBX 260.00 and GBX 5.50, respectively.
From the technical standpoint, 90-day RSI is currently close to the overbought zone, which means there is a likelihood for a short-term correction in the stock price.

Key Risks

Excessive competition in the industry could affect the revenue and profitability of the Group.The Company is still reporting a loss from operations. The increasingly complex regulatory environment poses tremendous pressure regarding data and cybersecurity.

Conclusion

The Group stated that it had received a positive result from the clinical trial of the antiviral therapy SNG001 in hospitalised COVID-19 patients.This assessment of SNG001 in COVID-19 patients could indicate a foremost breakthrough in the treatment of the hospitalised COVID-19 patients. However, the Company has shown a decline in financial performance in the financial year 2019. The Group is in the development stage and relies on grants and cash balances to carry on all the business activities.

Based on the headwinds faced by the Group, we have given a "WATCH" stance on Synairgen at the current market price of GBX 250.00 (as on 19 August 2020, before the market close at 1:28 PM GMT+1), while we look for any upcoming catalysts in the near term such as the commercial release of SNG001 for COVID-19 treatment.

Sanofi SA - Accelerated the Efforts to Develop Potential COVID-19 Vaccines

Sanofi SA (LON: 0O59) is a global biopharmaceutical Company, which focused on human health. It is transforming scientific innovation into healthcare solutions around the globe.

On 29 October 2020, the Company will announce the Q3 FY2020 results.

Recent News

On 17 August 2020, Sanofi has agreed to buy Principia Biopharma Inc. (PRNB) for an aggregate equity value of around $3.68 billion. This will strengthen Sanofi’s research capabilities in autoimmune and allergic diseases.

Financial Highlights (H1 FY2020, as on 29 July 2020)


(Source: Company Website)

In the first half of 2020, the sales increased by 0.9% (on a reported basis) year-on-year to €17,180 million, while the Company sales for Q2 FY20 was down by 4.9% (on a reported basis), driven by a negative effect in the exchange rate. In the first half of 2020, business earnings per share were €2.81, an increase of 8.1% on a reported basis and up 9.2% at CER.During the H1 FY20, the cost savings of €990 million were realized.

Share Price Performance

 
1-Year Chart as of 19 August 2020, before the market close (Source: Refinitiv, Thomson Reuters)

Sanofi SA’s shares were trading at EUR 87.87 on 19 August 2020 (before the market close at 1:40 PM GMT+1), up by 0.77% against the last day closing price. Stock 52 week High and Low were EUR 95.79 and EUR 67.78, respectively.

From the technical standpoint, 90-day RSI is currently close to an oversold zone, which means there is a good potential for a short term rebound in the stock price.

Key Risks

The COVID-19 pandemic may reduce the sales in targeted markets due to fewer promotional activities and lower healthcare spending on other diseases and could, therefore significantly impact the business operations.Fluctuation in foreign exchange rates could affect the operational performance of the Company.

Valuation Methodology



Conclusion

For FY2020, the Company expects EPS (earnings per share) to grow between 6% and 7% at CER. According to July 2020 exchange rates, the currency impact on 2020 business EPS is expected to be between negative 3% to negative 4%. Recently, it has made an acquisition with PRNB. This acquisition will bring significant resources to expand and accelerate the potential benefits of the therapies. It is also working with GlaxoSmithKline (GSK) to provide the COVID-19 vaccine. The Company achieved business EPS growth, supported by continued outstanding sales from Dupixent®. It also forged new R&D alliances, met important regulatory milestones, and accelerated the efforts to develop potential COVID-19 vaccines.

Based on the continued investments in R&D in H2 FY20 and support from the valuation as done using the above method, we have given a “BUY” stance on Sanofi SA at the current market price of EUR 87.87 (as on 19 August 2020, before the market close at 1:40 PM GMT+1), with lower double-digit upside potential based on 16.70x Price/NTM Earnings (approx.) on FY20E earnings per share (approx.).
 
 
*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.
*Dividend Yield may vary as per the stock price movement.

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