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Top Woodford stock AstraZeneca dives on drug blow

Pharmaceutical giant AstraZeneca, Neil Woodford's top holding, slumps after key lung cancer drug fails trial.

 
Top Woodford stock AstraZeneca dives on drug blow
 

Shares in AstraZeneca (AZN) have tumbled after the pharmaceutical giant announced a key lung cancer drug had failed an initial round of tests.

The shares slumped 15.2% to £43.26, dropping to the bottom of the FTSE 100, which fell 10 points, or 0.1%, to 7,442.

AstraZeneca said initial results of the study, known as Mystic, showed its Imfinizi immune-oncology drug was no more effective in preventing disease progression than chemotherapy.

'This is pretty much the worst case scenario for Mystic,' said Liberum analyst Roger Franklin. 'The shares will be weak for a prolonged period following today's news.'

Jefferies analyst Jeffrey Holford said the failure had wiped off up to 15% of AstraZeneca's earnings and placed the company's dividend under threat.

'Mystic has been a key component of AstraZeneca's long-term growth. With the failure of Mystic... now likely to be factored into expectations, the dividend may look less safe and we expect some investors will start to question its long-term sustainability, despite prior reassurances from management.'

Nicholas Hyett, analyst at Hargreaves Lansdown, labelled the news a 'body blow'. 'Analysts have been waiting for the numbers from the Mystic trial and had, admittedly tentatively, booked in billions of dollars of future sales from the combination therapy. Those healthcare billions will now be going elsewhere.'

The news represents a blow to Neil Woodford (pictured), with AstraZeneca the biggest holding in his £10.1 billion Woodford Equity Income fund, representing 8.7% of the portfolio.

At the other end of the index, drinks company Diageo (DGE) jumped  7% to £24.31, buoyed by strong full-year results, with profits up 25% at £3.6 billion.

'These numbers are encouraging news for Diageo investors,' said Steve Clayton, who holds the stock in his HL Select UK Income Shares and UK Growth Shares funds.

'Currency movements gave the company a big helping hand, but the underlying progress was strong too. The company is raising its targets for boosting profit margins and Diageo's well-established cash generation strengths are allowing them to launch a £1.5 billion share buyback.'

On the FTSE 250, Indivior (INDV) was a big mover, up 12.1% at 355.5p as the pharmaceutical group upgraded its profit forecast thanks to a stronger US market and lower costs.

Mitchells & Butlers (MAB) was another strong riser, up 12% at 250.4p, as the pubs group reported 2.6% sales growth.

Shore Capital analyst Greg Johnson said the results were 'encouraging'.

'In what was a challenging period for food-led outlets Mitchells & Butlers has issued a robust trading update,' he said. 'Margins are still expected to be squeezed this year although the more robust sales performance provides confidence in our full-year estimates.'

5 comments so far. Why not have your say?

SDRL

Jul 27, 2017 at 14:02

Woodford is trading too much. There was no reason to sell a great company like GSK. Buying a bank with low interest rates wasn't a good idea. He should not have sold BAE. AZN might merge with GSK or some other. Woodford should have bought RDSB because he doesn't own energy.

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Dave Knight

Jul 27, 2017 at 15:11

@SDRL

Ever thought about becoming a fund manager anf trying to do better?

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SDRL

Jul 27, 2017 at 15:35

Dave,

I own 80 positions and invest in stocks and bonds. So, I do a very similar work to a fund manager. I am diversified by industry and country. All my positions pay dividends or interest I like companies that are diversified. I rarely sell. Out of 80 securities in my portfolio I am down in 4 but not by much and they are good companies. I have been investing for many years. I would add that I rarely follow the advice of stock mavens or economists.

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BOB 2

Jul 27, 2017 at 18:44

.

Remember https://www.youtube.com/watch?v=SJUhlRoBL8M

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Andrew Stevenson

Jul 27, 2017 at 20:27

Doesn't CityWire normally prefix his name with 'legendary investor' ?

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