What's going on?
Shares in AstraZeneca (a British pharmaceutical giant) rose a whopping 9% on Friday, after the company announced positive results from a lung cancer drug trial.
What does this mean?
Imfinzi, the drug in question, is targeted at late stage lung cancer patients who have not responded to conventional treatment and surgery. Lung cancer is the leading cause of cancer death, and its treatment is an extremely competitive and lucrative business (and obviously beneficial to patients). This can potentially open up a huge market for AstraZeneca, relatively untapped by competitors and worth billions of dollars. Other big players such as Merck and Bristol-Myers are also chasing this opportunity, but these trial results now put AstraZeneca in a much stronger position.
Why should I care?
The bigger picture: UK stocks just keep rising!
The surge in AstraZeneca’s stock price helped lead to a new record-high close of the FTSE 100 index (largest 100 public companies in the UK) on Friday. Despite the Brexit vote, which initially roiled investors’ confidence, UK stocks have continued to hit fresh highs this year. This is partly because a weaker pound has greatly benefited big multinationals based in the UK. These days, the foreign income they earn looks much more attractive when reported in pounds (for example, $100 today is just shy of £78 but one year ago it would have been closer to £70).
For the stock: This drug could be a game changer for AstraZeneca.
AstraZeneca’s product pipeline is pivotal to its success going forward. Investors are enthusiastic that Imfinzi’s growth prospects can offset past failures in other drug developments and the expiry of some of AstraZeneca’s patents. However, drug development is complicated and it’s early days as yet – it could take years before it is in use. Markets often react quicker than science’s ability to conclusively determine how, and in what circumstances, a drug will be effective.