AstraZeneca: Tagrisso Competitive Threat Looks Manageable While New Cancer Data Supports Dato-DXd

We are holding firm to our AstraZeneca AZN fair value estimate following clinical updates from the European Society of Medical Oncology (ESMO) annual meeting. Overall, the innovation updates at the conference help support Astra’s current drugs and next generation of drugs, reinforcing the firm’s wide moat.

Astra’s EGFR lung cancer drug Tagrisso (12% of total sales) remains reasonably well positioned following details of a competitive head-to-head study from Johnson & Johnson’s combination of Rybrevant and lazertinib. While the J&J treatment showed a 30% improvement in disease progression or death, we believe the increased side effects will limit uptake in this first-line setting. Further, if patients prefer a more aggressive treatment option, Tagrisso plus a few cycles of chemotherapy looks potentially stronger on progression-free survival versus the J&J treatment and has the benefit of dropping to just one drug after the initial cycles of chemotherapy. A key competitive threat that could improve the outlook for J&J’s treatment is the overall survival rate, which is already trending toward an improvement of 20%. We believe the overall survival rate needs to mature beneficially to become statistically significant before gaining major market share in the first-line setting. We expect this could take at least one year but potentially longer.

Key data on Dato-DXd (datopotamab deruxtecan) showed a solid profile in treating second-line lung and breast cancer. We believe the drug is increasing likely to gain approval in these settings. However, we remained concerned that the side-effect profile of the drug may reduce the treatment’s potential in the first-line settings, where phase 3 studies are ongoing and which represent the biggest commercial opportunities. We expect early-line phase 3 studies to begin reporting out in 2026 and 2027.