Do these 3 new money generators for AstraZeneca make it a buy?

Big pharmaceutical companies like Astra Zeneca (AZN -0.73%) go up and down depending on how much money they can make from their drugs in the market. As regulators at the European Medicines Agency (EMA) gave the company the go-ahead for three of its drugs in the past month, shareholders are expected to salivate in anticipation of future sales.

Now only the final stamp of approval from the European Commission (EC) for marketing authorization awaits before sales can begin. It’s obligated to issue a ruling within 67 days of the EMA’s findings, so a triad of marketing efforts is likely upon us. But do the three drugs have any hope of shaking things up for a company as big as AstraZeneca, and if so, does that mean they’re valid reasons to buy the company’s stock?

The money is already starting to arrive

The trio of drugs that the EMA has recommended for approval for their initial or expanded indications are called Tezspire, Ultomiris and Enhertu.

Tezspire is a biologic therapy for severe asthma that is still problematic after treatment with corticosteroids in addition to another medication.​​ It was already approved in the United States late last year, but it does not ‘generated only $3 million in gross profit for the company in the first quarter, in part because it shared proceeds in the United States with its development partner, Amgen.

Sales will likely increase over time, especially with the addition of the EU market, although it’s unclear how much management expects at the top. It’s also being studied for a host of other indications, so its contribution to AstraZeneca’s growth is probably just beginning.

The second drug proposed for approval, Ultomiris, is intended as an add-on treatment for certain subsets of patients with generalized myasthenia gravis (gMG) – a chronic disease of the skeletal muscles. It could soon become the only long-acting drug on the EU market for this population, giving it the potential to capture massive market share.

However, the fact that Ultomiris is an add-on treatment rather than a first-line treatment means that its total addressable market is likely to be smaller. And since it only targets a portion of this patient population, it further limits the size of its addressable market. On the bright side, the drug is already approved for several other indications and earned $419 million worldwide in the first quarter. Therefore, any additional income the business can get from it is icing on the cake.

Finally, Enhertu is an antibody-drug conjugate (ADC) for patients with unresectable HER2-positive breast cancer who have previously been treated with another HER2-targeting drug. Breast cancer is the most common form of cancer and approximately 20% of patients are HER2-positive.

Additionally, the therapy is already approved in a handful of global markets and it has generated $75 million in gross profit from sales in the first three months of 2021. AstraZeneca is also studying Enhertu for a few other cancers, such as colorectal cancer. and lung cancer, so this approval may not be the last. And if its recent performance is anything to go by, it will be a solid seller in the EU.

Keep things in context

As positive as these three new approvals are for the company, they alone are unlikely to be good reasons to buy AstraZeneca stock. AstraZeneca’s revenue over the past 12 months is nearly $41.5 billion, and this year management plans to increase its revenue by a teenage percentage. Increased sales of Ultomiris, Enhertu and Tezspire are no doubt part of that calculation, but – at least for now – they might not bring in enough to budge the annual sum of many.

Nonetheless, the sheer breadth of AstraZeneca’s pipeline and its products to market means it is likely to continue to be a strong contender in the biopharma space for years to come. Currently, the drugmaker has at least 183 programs in its pipeline, 16 of which are in late-stage development. That means it could still be worth adding to your portfolio, provided you’re more interested in an ever-expanding giant than a fast-growing stock.

About Michael Bill

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