AstraZeneca under pressure over drug trial caution

AstraZeneca came under pressure on Wednesday after UBS turned cautious ahead of results from a pivotal lung cancer drug trial.

The clinical study, known as Mystic, is due to report top-line findings in mid-2017. But AstraZeneca’s recent rally makes the risk-reward unappealing ahead of what will, at best, be an inconclusive result, UBS argued.

Progression-free survival rates due this year for the durvalumab treatment could be enough to mark it as a likely loser. However, investors need to wait until next year for the overall survival data necessary to identify it as a clear winner, UBS argued.

In the meantime, AstraZeneca is selling assets and doing external deals to pump money into its research pipeline, which makes its numbers an unreliable basis for a valuation, said UBS. Once things go back to normal, and even allowing for considerable pipeline success, the cash flow potential over the next decade suggests AstraZeneca shares are now reasonably valued rather than strikingly cheap, it said.

AstraZeneca closed 2 per cent lower at £48.58 in a mixed wider market. The FTSE 100 edged 0.1 per cent higher at 7,331.68, a 9.86 point advance.

South African stocks led the fallers as President Jacob Zuma fought a growing backlash against his leadership. Old Mutual was down 4.4 per cent to 190p, Investec fell 1.9 per cent to 536.5p and Mediclinic lost 1.7 per cent to 679p.

But Lonmin, the South African platinum miner, rallied 33 per cent to 114.8p as the rand’s weakness lowered its costs and took some pressure off its balance sheet.

Petrofac, the oil services group, lost 3.5 per cent to 890.5p after both Bernstein and Deutsche Bank advised selling. Though Petrofac’s management is optimistic “into what is fundamentally an opaque market”, the group’s contract backlog looks too thin to give comfort to 2018 forecasts given modest contracting activity and recent project losses, Deutsche said.

Allied Minds plunged 29.1 per cent to 185p after the technology incubator’s new chief executive pulled funding from seven subsidiaries and wrote off more than a quarter of its portfolio value. Sector peer IP Group, which was rumoured last year to have weighed a merger with Allied Minds, retreated 7.7 per cent to 139.3p.

Housebuilder MJ Gleeson rose 5.1 per cent to 689.5p after Berenberg started coverage with a 740p target.

Aim-listed BNN Technology, a Chinese mobile payment systems developer, fell 25.1 per cent to 70p on record volume of more than 20 times the daily average. BNN said it was not aware of any reason for the move and gave an update on gross transaction volumes, a metric it had never previously reported.