Over the past five years, shares in FTSE 100 stock AstraZeneca (LSE: AZN) have risen over 130%. During the same period, the benchmark index itself has not gained a single point overall.
This tells me a couple of things. First, leading companies in the biopharmaceutical business can dramatically outperform the benchmark if they do the right things. And second, trying to pick the right moment to buy into companies such as AstraZeneca is no easy task.
But for me, a good moment is now. Its shares have dipped from a 2023 high, which I think is mainly due to profit-taking after its Q1 results. Whatever the reason, it does create a buying opportunity at cheaper levels than we have seen for a long time.
Another new deal announcement to expand its product portfolio indicates to me that it is still aggressively targeting growth. This was also a key message in its Q1 results.
The latest deal for growth
On 12 May, AstraZeneca pledged up to $600m for LaNova Medicines’ preclinical stage antibody-drug conjugates (ADC) programme. The ADC market has expanded rapidly during the past five years, clocking up around $7bn in sales last year.
According to AstraZeneca, this new programme could produce the best-in-class ADC for multiple myeloma. And it comes with Investigational New Drug approvals already in place in the US and China.
The global head of its multiple myeloma division, Nina Shah, highlighted that the new deal “enriches our growing haematology pipeline”.
This pipeline already includes KYM Biosciences’ potential best-in-class Claudin 18.2 ADC. In February, AstraZeneca spent $63m upfront for the global rights to this.
Extensive new product pipeline
Aside from these two high-potential deals, the company has an extensive new product pipeline, comprising 179 items. Its main FTSE 100 counterpart, GSK, has 68.
According to AstraZeneca, this pipeline momentum includes positive Phase III results for a Lynparza-plus-Imfinzi combination in ovarian cancer. The same status applies to Imfinzi in lung cancer. There is also promising new data for Enhertu across a range of cancer types.
Additionally in the year to date, the company has started six other new Phase III trials. It is also on course to initiate 30 over the course of this year.
Overall, the global biopharmaceutical giant forecasts total revenue this year to increase by a low double-digit percentage, excluding Covid medicines. It also expects core earnings per share to increase by high-single to low-double-digits at the same time.
The risks for the share price to me are the same as for those of any biopharma business. They spend much time and money on product development and if one fails then it is a huge setback.
They are all also open to legal action against them if products cause problematic side effects. Indeed, AstraZeneca is currently involved in a potentially large lawsuit in the UK over alleged side effects of its Covid vaccine.
However, I already have positions in the company with the expectation of continued strong growth. I think this will feed through into the continued outperformance of its share price. If I did not have these shares already, then I would buy them right now without any hesitation.
