EFTA01385515.pdf

> Healthcare Deutsche Bank 0 AstraZeneca — Richard Parkes, BUY, close 5171p, 5700p tgt, 10% upside • 2018 is a likely turning point for margin and EPS momentum. We Bull/bear case: limited downside, substantial upside potential believe EPS should grow at a c12% EPS CAGR to 2022 as it emerges from its patent cliff and margins grow. 7500p 513 • Best-in-class pipeline. Exceptional data on new oncology portfolio puts AZ :,Ilate Nice 513p 6500p MI in a strong position despite MYSTIC failure. 1083p 228p 5700p NMI= ■285p 5500p - - Expectations for the overall survival readout of MYSTIC in 1H18 are PM.. VP.. low, so this is close to a free option in our view. A positive would deliver 4500p >10% upside. 3500p - - The new portfolio, plus other growth products, should add >$2bn in incremental sales in 18E. 2500p - • Substantial margin leverage momentum improvement. Several new 1500p Bear Pipeline -ye Mystic -ye Base Tagrisso Mystic +ye Pipeline Bull launches leverage existing infrastructure and thus will have very high Bull success Source: Deutsche Bank margins. - We expect flat EPS in 2018, but substantial growth thereafter. The equity story should shift to one of delivering or beating on revenue and Substantial EPS acceleration from 2018 driven by top-line growth earnings expectations. 35,000 Total revenues (Sm) —Core EPS (S) • The best-in-class growth justifies a larger premium than at present. The 30,000 shares trade on 17x 18E PIE vs. 16x for peers. 25,000 • Multiple catalysts from pipeline. Data on existing drugs Imfinzi and 20,000 Lymparza in 1Q18, plus readouts on two potential blockbusters in roxadustat (anemia in chronic kidney disease) and anifrolumab (lupus) in 15,000 the next 12 months. 10,000 5,000 Related DB Research: 0 Lynparza survey supports market leadership in potential >$7bn class; Buy (Parkes) 2015A 2016A 2017E 2018E 2019E 2020E 2021E 2022E Pharma: 2018 Outlook: Fundamentals solid but fewer debates than in prior years 1Parkesi Source: Deutsche Bank. company data Deutsche Bank Research* European Equity Focus —Jemmy 2018 CONFIDENTIAL - PURSUANT TO FED. R. GRIM. P. 6(e) DB-SDNY-0086801 CONFIDENTIAL SDNY_GM_00232985 EFTA01385515