One of the most anticipated events in the history of AstraZeneca (LSE:AZN) occurred this week. The company, in conjunction with Oxford University, released an interim analysis of their Covid-19 vaccine candidate, AZD1222.
AZN’s vaccine candidate showed an average 70% efficacy and there were no safety concerns. Excitingly, one of the company’s dosing regimens could be up to 90% effective.
Although the vaccine candidate showed a lot of potential, AstraZeneca shares nevertheless fell slightly given that both Pfizer and Moderna’s vaccine candidates had around 95% efficacy.
Given the decline in shares, is the stock a bargain?
Long-term potential of AstraZeneca shares
With a forward P/E ratio of around 21, AstraZeneca shares aren’t exactly cheap.
Given technology advancements, however, I think the company is a bargain at current prices for the long term.
Technology has the potential to affect pharmaceutical companies substantially. With the continual development of quantum computing and AI, there could be huge breakthroughs in pharma and biotech in the coming decades.
As one of the leaders in the sector, AZN is in a great position to benefit, in my view. With its R&D prowess and resources, I think it could be one of the key companies that develops blockbuster drugs in the future.
If AZN develops worthy solutions to address big global problems, I feel the company’s profits could grow substantially.
Emerging and developing markets
As for AZD1222, AZN’s vaccine could help its future profit growth in one its target sectors, emerging and developing markets.
As I have written before, AZN has an extensive operation in the emerging and developing world. The company is also committed to growing its operations in those regions.
In terms of growing business in emerging and developing markets, I think AZN’s vaccine could be a great door-opener, if approved.
Although they might be more efficacious on the surface, Pfizer and Moderna’s vaccines require substantially cooler temperatures than AZN’s and are more expensive. That’s a big plus for AstraZeneca.
AstraZeneca isn’t trying to make money from the vaccine in low-to-middle-income countries while the pandemic still rages, and I feel this could also help its appeal in emerging markets.
Once emerging and developing nations become richer, I see the pharmaceuticals giant as potentially profiting from having established a strong base already.
With possibly less need for heavy marketing spend, it could mean higher future margins and higher profits in the long run if things go AZN’s way.
Is AstraZeneca a bargain?
Although AZN’s stock price has decreased since the company released its interim analysis of AZD1222, I think the decline is an opportunity for long-term investors.
AZN has many competitive strengths given its scale, financial resources, and R&D capabilities. I like the company’s pipeline and I think it could grow its earnings faster if emerging and developing markets grow faster than expected.
Looking at the share’s valuation and the fact that I’m bullish on the future of emerging and developing markets, I really do think AstraZeneca is a bargain today.
Jay Yao has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.