4 Reasons To Buy, 2 Controversies Surrounding AstraZeneca

Bernstein upgraded shares of AstraZeneca plc (ADR) (NYSE: AZN), giving four reasons for its optimistic assessment. All the same, the firm also harped on two controversies surrounding the company.

As such, Bernstein upgraded shares of AstraZeneca from Market Perform to Outperform and lifted its price target from $30 to $39.

In pre-market trading, shares of AstraZeneca were up 2.38 percent to $33.59. At time of publication following the opening bell, shares were up 3.57 percent at $33.98.

4 Reasons To Buy

Analyst Tim Anderson highlighted four points supporting the investment case for AstraZeneca:

1. The analyst thinks the company's base is in better shape now due to the progress made elsewhere despite the first readout of MYSTIC being negative and the absence of new pipeline drugs to 2025.
2. Anderson also noted that the company has one of the fullest phase 3 pipelines in the group.
3. The analyst is also enamored with the way how the management has been changing the face of the company.
4. Lastly, the analyst thinks AstraZeneca could be a take-out target, given its full pipeline, superior growth and its comparatively smaller size. That said, the firm feels, there is little premium for this in the current share price.

Company Controversies Persist

Meanwhile, delving on the controversies, Bernstein noted the externalization of the divested businesses, which artificially boosts earnings per share. Secondly, amid the ongoing MYSTIC uncertainty, the firm thinks there is more upside than the downside.

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The results of a late-stage study of its immuno-oncology drug candidate Imfinzi dubbed MYSTIC released in late July showed that the primary endpoint of progression free survival was no met. The treatment candidate was evaluated as a monotherapy or as combo treatment with CTLA-4 drug tremelimumab for advanced, first-line non-small cell lung cancer patients.

The company then said it would continue to evaluate two additional primary endpoints of overall survival for Imfinzi monotherapy and Imfinzi plus remelimumab combination.

Meanwhile, the firm believes AstraZeneca is a pipeline-driven return-to-growth story. According to the firm, 2017 could mark a trough on a revenue basis, although earnings per share may not begin to grow until 2019.

Longer term, the firm thinks earnings per share growth would be among the very best of the nine major EU/U.S. pharma companies it covers.

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