In early June I wrote a bullish article on AstraZeneca (NYSE:AZN), with a thesis stating that the company's extensive oncology pipeline as well as its attractive buyout prospects in light of Pfizer's (NYSE:PFE) recent attempts to court Astra (which ultimately valued Astra at $120 billion) were compelling reasons to accumulate shares. However, I also factored in the underlying risk to an Astra investment, since, after all, Astra is one of many Big Pharma companies to suffer from patent expirations and lackluster performance (see previous article for more details). For Astra, these issues have continued to exacerbate top line pressure, thus raising concern about its long-term prospects. But with the EU approval for Astra's opioid-induced constipation drug Moventig, there is more evidence to support my claim that Astra can flourish independent of Pfizer. Thus, I reaffirm my bull thesis since I'm confident that Astra should improve its long-term prospects with this landmark achievement.
Some key highlights from Astra's latest announcement are as follows:
- The European Commission (NYSE:EC) approved Moventig for the treatment of opioid-induced constipation in adult patients who have had an inadequate response to laxatives.
- The drug is the "first once-daily oral peripherally-acting mu-opioid receptor agonist (PAMORA) approved in the EU."
- Moventig is part of a license agreement in 2009 with Nektar Therapeutics (NASDAQ:NKTR).
- This follows FDA approval for Moventig on September 16, 2014, and a subsequent positive EMA recommendation.
Despite the fact that shares of Astra have declined ever since the announcement of new tax inversion laws -- which basically solidified that Pfizer will not attempt to acquire Astra following the mandatory six-month waiting period -- I reiterate my bull thesis on Astra following the positive EMA decision for Moventig. Astra now has the opportunity to penetrate a largely untapped market in OIC, which is projected to reach $2 billion by 2017, up from only $144 million in 2012. Clearly, the demand for OIC treatments is rapidly increasing, coinciding with a rapidly growing patient population. The EU commercial launch of Moventig will trigger a $40 million upfront payment to Nektar, which follows a $100 million upfront payment to Nektar from Astra earlier this month. Further, the cash flow from Moventig should be substantial considering the limited treatment options and exponential market growth. As a result, I reiterate my bull thesis on Astra.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.