Where the AstraZeneca Stock Price Is Headed After ASCO 2015

Astrazeneca stock priceThe AstraZeneca stock price is hovering near $68 after the company presented at the American Society of Clinical Oncology (ASCO) meeting in Chicago this week.

ASCO is an annual event that's attended by 30,000 people and hosts more than 4,000 presentations. This year's meeting began on May 29 and ran through June 2.

It's the premiere event for companies developing cancer drugs. And every year, some cancer stocks get a serious ASCO-related lift.

Money Morning's Executive Editor Bill Patalon calls it the "ASCO Effect." Last year, he recommended Bristol Meyers Squibb Co. (NYSE: BMY) and it climbed 36.5% in the following year.

"The general run-up in oncology stocks is related to the heightened general focus on cancer-related medicine," Patalon said last week. "And there's usually a really big pop in the shares of several companies whose researchers present important papers at the conference."

So the question for investors is - will the AstraZeneca Plc. (NYSE ADR: AZN) stock price see a post-ASCO bump?

The company was one of the headliners at ASCO, and here's what we learned...

AstraZeneca's (AZN) Big ASCO Update

AstraZeneca officials held an investor science event during ASCO this week and provided an update on their immune-oncology pipeline.
Immuno-oncology was a major theme of the 2014 ASCO event, according to Patalon. It's a new category of drugs that use the body's own immune cells to target a variety of cancers. The market potential is huge, and Patalon described it as the biotech sector's version of "the California Gold Rush."

AstraZeneca Plc. (NYSE: AZN)

Recent Price: $67.40

Market Cap: $84.6 billion

2015 EPS Estimate: $4.21

Operating Margin: 13.5%

Beta: 0.78

This week, AstraZeneca announced two of its new immune-oncology drug candidates had seen exciting results. The drugs, MEDI4736 and tremelimumab, are being tested for treatment of non-small-cell lung cancer.

The company reported increased response rates in patients with several different types of tumors who have been taking the combination of drugs. AstraZeneca will now advance the combination into phase 3 trials.

Completing phase 2 and phase 3 FDA trials can be a major catalyst for biotech stocks. Investors will want to keep a close eye on this combination as it heads into phase 3 trials.

AZN also announced that MEDI4736 is being combined with other immune-oncology drugs for the treatment of melanoma, lung cancer, and other types of cancer.

Another reason the AstraZeneca stock price is climbing this week is the firm's news it will partner with Eli Lilly and Co. (NYSE: LLY). The two companies will be testing a combination of MEDI4736 with Eli Lilly's drug Cyramza. This will be a phase 1 trial testing the combination's efficacy against various solid tumors.

Wall Street has also gotten more bullish on AZN. Analysts surveyed by Thomson/First Call have an average target of $75.97 for the AstraZeneca stock price. That would be a gain of 12.7% from today's opening. One analysts has a high target of $80.90, which would be a gain of 20%.

These all look like good signs for AstraZeneca's stock price. But looking a little closer at this stock shows what these AZN price targets are missing. Take a look...

What's Next for the AstraZeneca Stock Price in 2015

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Despite some of the encouraging news from ASCO and the high price targets, some of AZN's financials are worrying.

Next quarter the company is expected to report earnings per share of $1.03. That's a 26% drop from last year. Revenue is also expected to drop 7.8% this quarter. Full-year 2015 earnings are expected to dip 1.7% from 2014.

Another figure to account for is AZN's price/earnings to growth (PEG) ratio. A stock has a "fair value" price if it has PEG ratio of 1. Right now, AZN's PEG ratio is more than five. That means it is highly overvalued right now.

AZN stock has been volatile in 2015, dropping below $64 in March before climbing above $73 in April. Today, it opened at $67.40. It's still down 3.8% in 2015 and 6.9% in the last 12 months.

Since Monday, the AstraZeneca stock price has climbed a slight 0.3%.

The Bottom Line: The AstraZeneca stock price is climbing slightly this week following the ASCO meeting in Chicago. While AZN presented some encouraging news on its immune-oncology efforts, this is a biotech stock to avoid for now. There are better biotech stocks to invest in now.

Instead, we have a better profit opportunity for investors. Patalon has been closely following this week's ASCO events and has found a little-known company on the forefront of an amazing new technology.

Follow me on Twitter @KyleAndersonMM.

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