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LivestreamMenuHSBC has lost conviction in its buy rating for AstraZeneca and forecasts a “tough path ahead” for the British-Swedish drugmaker, which last week posted a rare clinical trial failure that sent shares tumbling. The bank’s analysts have downgraded the stock from buy to hold, as the team “no longer finds the risk-reward balance attractive,” according to a Monday research note. HSBC slashed its target price for AstraZeneca to £137.50 ($183.95) from £165, marking a downward revision of over 16%. Shares of AstraZeneca fell as much as 9% on Friday after a late-stage clinical trial for a heart disease drug failed to meet its target. Analysts suggested investors’ trust in the company may be waning. HSBC analysts agree, writing that the key to AstraZeneca’s historic valuation multiples has been “the market’s confidence in the company’s research and development engine.” They added that if the bear case scenarios for its trials play out, three sequential losses “might reduce confidence” in the company’s R & D engine and set the stage for a rerating. For years, AstraZeneca has commanded some of the richest valuations among large European pharmaceutical companies on the assumption that management consistently delivers successful late-stage clinical trials across oncology, rare diseases, and specialty medicines, and replenishes its portfolio with new blockbuster medicines. Under CEO Pascal Soriot’s 14-year reign, AstraZeneca has developed a reputation as a pharma powerhouse that rarely posts negative trial results. Its shares are down 12% since the results were released. — CNBC’s Elsa Ohlen also contributed to this report.Read More
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