The AstraZeneca (LSE:AZN) share price is approaching all-time highs. A recent catalyst, sending the shares moving upwards by over 3%, was the report that its experimental lung disease medicine hit its targets in two late-stage clinical trials. This was seen as a real treatment breakthrough.
A breakthrough in COPD
The drug in question is tozorakimab, a monoclonal antibody that works by suppressing the protein interleukin-33 (IL-33). It reduces inflammation and disrupts the cycle of mucus dysfunction that drives chronic obstructive pulmonary disease (COPD).
COPD isn’t a niche condition — it’s the world’s third leading cause of death. The trial results showed the treatment reduced flare-ups in both former smokers and the broader patient population versus placebo.
What made the market sit up wasn’t just the data itself, but what it proved. Previous IL-33 drugs from Sanofi and Roche had failed and AstraZeneca’s results are the first two confirmatory Phase III trials for an IL-33 biologic. That’s a genuine scientific landmark, and that’s why the stock market’s paying attention.
Pharma can be hard to value
Here’s the honest truth. It took me a while to get my head around the announcement above. And I think a lot of investors would be the same position unless they had a strong background in biology, medicine etc.
That’s the issue with pharmaceutical companies for me: they’re extraordinarily difficult to analyse. The headline financials — revenues, margins, earnings growth — only tell half the story.
The real question is always what’s coming next? Answering that requires additional knowledge, which I and many others simply don’t have.
AstraZeneca, for example, has some 200 products in its pipeline — some more important and promising than others.
For most investors, pharma’s an act of faith as much as analysis — you’re betting on management and the depth of the pipeline as much as any spreadsheet metric. But the company should have the scientific grounding to cut through this complexity — and it’s notable that 26 brokers currently cover AstraZeneca with the consensus leaning firmly towards Buy.
The valuation looks fair
AstraZeneca trades on a forward price-to-earnings (P/E) of around 19 times for 2026, representing a modest premium to the sector average and substantially higher than the average the UK average.
That might sound punchy, but the earnings growth forecast is strong and the three-year normalised EPS CAGR sits at over 26%. Profitability metrics are exceptional too, with return on equity of 22.9% and operating margins of 23.4%.
But, of course, things like the price-to-earnings-to-growth (PEG) ratio don’t give us a full picture here. And that’s because the attraction of biotech and pharma is often long term due to ageing populations and expanding diagnosis rates.
So my view is that the valuation isn’t excessive for a company with this kind of pipeline depth and increasingly predictable growth. It’s worth considering at current levels, but I’d add that the margin of safety isn’t as strong as it once was.
