Shares in the pharmaceuticals giant haven’t suffered as badly as the index, down a slightly less scary 16%. The shares even picked up at the start of March, possibly from investors hoping for an early vaccine breakthrough.
I rate AstraZeneca as a strong buy at the moment, as the FTSE 100 slumps, while bearing in mind that it could become even better value. But my take on it is not based on the possibility of profits from any coronavirus treatments.
No AstraZeneca vaccine
No, medical experts have made it clear that there’s not going to be any vaccine turning up any time soon. It could take months to even identify the most effective virus parts for stimulating an immune response. And even then, it could take another year or more to complete the test phases and get to full-scale production. The virus will have been and gone by then.
So why am I bullish about AstraZeneca? It’s for a number of reasons, one of which is demonstrated by a news release Thursday. It’s a simple statement that the firm’s phase III trial of cediranib added to Lynparza for a specific form of ovarian cancer has not been successful. “The trial did not meet the primary endpoint in the intent-to-treat (ITT) population of a statistically significant improvement in progression-free survival,” it said.
Why does that matter for investors? Well, between the lines, one thing the update says to me is “Business as usual.” And that’s what an investment in AstraZeneca is all about.
We should aim all our stock investments at the long term. So any company that can see its way through a few months of pandemic pandemonium, without suffering any significant financial harm, has the potential to be a great investment right now.
But for AstraZeneca, the horizon has to be longer than most. It’s seven and a half years since Pascal Soriot came aboard as chief executive. His target was to get the company’s drug development pipeline back on track. And that’s only just starting to bear fruit.
What harm could the coronavirus do to AstraZeneca? Maybe it will affect the R&D department, if employees should have to stay at home for a while. And perhaps the firm might have to scale back its sales and marketing efforts for a time.
But against the long-term nature of the drugs development business, it would seem like barely a momentary delay. What’s another few months, if the worst comes to the worst, against a decades-long outlook?
Bargain times are back
Prior to the current market downturn, AstraZeneca shares had been flying in anticipation of the company’s return to earnings growth. The bargain years, when I was convinced by AstraZeneca as a long-term investment proposition, were gone.
But I think those buying opportunities have returned once more, and AstraZeneca shares could become even more attractive in the coming weeks if the FTSE 100 crashes further.
It’s ugly out there…
The threat posed by the coronavirus outbreak has spooked global markets, sending stock prices reeling.
And with the Covid-19 virus now beginning to spread beyond of China and Italy, it seems very likely that the bull market we’ve enjoyed over the past decade could finally be coming to an end.
Against such a backdrop of market worry, it’s little wonder that many investors are starting to panic. (After all, nobody likes to see the value of their portfolio fall significantly in such a short space of time.)
Fortunately, The Motley Fool is here to help, and you don’t have to face this alone…
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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended AstraZeneca. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.