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 AZN (which ultimately valued AZN at $120 billion) were compelling reasons to accumulate shares. However, I also factored in the underlying risk to an AZN investment, since, after all, the company is one of many to suffer from patent expirations and lackluster performance (see previous article for more details).
For AstraZeneca, these issues have continued to exacerbate top line pressure, prompting concern about its future prospects. But with the accelerated FDA approval for AZN's ovarian cancer drug, Lynparza (olaparib), there is more evidence to support my claim that the company can flourish independent of Pfizer. Thus, I reaffirm my bull thesis, since I'm confident that AZN should improve its long-term prospects with this landmark achievement. Some key highlights from AZN's latest announcement are as follows:
- AstraZeneca Plc's ovarian cancer drug has been granted an accelerated approval by the U.S. health regulator, a day after the treatment was approved by the European Commission.
- An advisory panel to the U.S. Food and Drug Administration had voted in June against granting an accelerated approval to the drug, Lynparza, citing inadequate data.
- Lynparza aims to treat ovarian cancer in patients with certain hereditary gene mutations. The drug is also being tested as a treatment for other cancers, including breast and gastric tumors.
The company has flagged olaparib as a potential $2 billion-a-year seller.
Despite the fact that shares of AstraZeneca have largely declined ever since the announcement of new tax inversion laws, coupled with Pfizer's announcement of a massive stock buyback - both of which essentially solidified that it will not attempt to acquire AZN - I reiterate my bull thesis on AZN, following the FDA approval for olaparib. This achievement follows the EU approval for olaparib on Thursday. With approvals in the US and the EU, AZN now has the opportunity to penetrate a large market in ovarian cancer, currently estimated at $19 billion, and projected to rise to $35 billion by 2018. Furthermore, CEO Pascal is very optimistic about the market potential for olaparib, having routinely stated that it could be a $2 billion-a-year seller. Ultimately, I'm inclined to agree, for not only is olaparib the first PARP inhibitor in its class to reach the EU, but it is also indicated for a variety of different cancers, which should increase AZN's market opportunity. In the near future, investors should watch for AZN's product pricing of olaparib and its anticipated launch dates for olaparib in the US and the EU.
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