AstraZeneca’s latest update was more bitter than sweet as it said the drugs don’t work.
A setback for a promising treatment knocked its share price for six and acted as a major drag on the FTSE 100.
It meant the UK market was the only major European index to be in the red as others including the Dax and CAC 40 staged a comeback after yesterday’s miserable session.
Many of yesterday’s losers dominated the risers’ list, including miners and banks as investors took the view that Donald Trump might not let the Iran war rage on. He hinted that Iran still wanted to make a peace deal, giving the market hope that a resolution is still possible.
Oil prices eased back by 1% to $77.30 per barrel, providing some relief to those who feared new inflationary pressures. The problem is that the news flow continues to change direction at the click of a finger and it’s impossible to say with any certainty what could happen next.
Computacenter’s shares soared after enjoying another blockbuster quarter. It is benefiting from strong demand in North America and the UK from AI-related spending.
Capita has quantified the impact of its underperforming civil service pension scheme. Having gone with its tail between its legs and apologised for not doing its job properly, Capita now says it will take an earnings hit of up to £40 million on associated contract failures. Investors are royally cheesed off, with another slump in the share price. The stock has now fallen by 35% in just a month.
Astrazeneca
Investors have been shocked by AstraZeneca’s drug trial flop, wiping £20 billion off its market value. AstraZeneca has bold plans to hit $80 billion in sales by 2030, and investors will now be asking if this target is credible.
It’s not unusual to see phase III trials fail, but AstraZeneca has had far more hits than misses so far this year. It’s a giant in the drugs industry and that creates high expectations for success.
AstraZeneca might have enjoyed a good run with product developments, but the failure of Wainua in phase III trials is a reminder of the high risks that come with the pharma and biotech industry.
New treatments are only approved if there is clear evidence they have a positive impact on the patient and are safe to use. Drug companies must go back to the drawing board and rejig the formula if both boxes aren’t ticked.
Dan Coatsworth: Head of Markets
Dan Coatsworth is AJ Bell's Head of Markets. Dan has been with the company since December 2012 and has more than 18 years' experience in the industry, following the markets and all things investing. He...
