Astra Zeneca (NYSE: AZN) had investors on the edge of their seats this morning in anticipation of COVID-19 data. AZN put investors at ease after their COVID-19 Phase I trial saw a positive immune response in patients. Most investors expected the stock to rocket off such news. However, investors instantly began to sell after the positive trial results. Ultimately, causing confusion to spread. Therefore, this article aims to provide a clear outline of the results, AZN’s bigger picture, and whether YIG sees value in an investment.

Table of contents 
1. Is AZN's Phase I data positive? 
2. Astra Zeneca now holds an impressive COVID-19 bank. 
3. Does YIG see value in an AZN investment?

AZN’s Phase I COVID-19 trial data

At a base level Phase I trials aim to test whether the drug is safe. In the case of Astra Zeneca, the answer was yes. The vaccine produced a robust immune response according to the medical journal the Lancet. Oxford researchers added to the test results as Professor Adrian Hill stated “the vaccine is more likely to provide protection against the virus, though nothing is guaranteed.” Despite the green light for safety, Astra Zeneca dropped 6% after the announcement. Leaving many investors confused as to why there was a sell-off. Especially as pre-market trading was bullish.

Phase I complete where to next for AZN investors?

Every drug travels down three paths simultaneously. These include the manufacturing, funding, and drug development. On the manufacturing front Astra Zeneca will look to ramp up production in the months ahead to ensure the vaccine, if effective, is distributed as soon as possible. Consequently, investors should expect to see a manufacturing update soon, maybe with the Coalition for Epidemic Preparedness Innovations. Overall, AZN looks to “distribute 2 billion doses of the vaccine with Oxford. 

Astra Zeneca now holds positive pre-clinical and Phase I trial data under its belt. The next step is Phase II and III, which will test the efficacy of the vaccine. Overall, AZN expects to have a vaccine by next year.

AZN’s funding pathway is looking brighter every month, but then again so are other vaccine frontrunners. Astra Zeneca has received $1 billion from Operation Warp Speed and $23.7 million from the Biomedical Advanced Research and Development Authority (BARDA). If AZN’s vaccine candidate continues to show positive results, then the money should follow. Overall, Astra Zeneca is a sound financial position to see their vaccine through the clinical timeline.

Does YIG see value in Astra Zeneca

Before I begin, I am obliged to remind our viewers that this is not financial advice but rather commentary from extensive research. 

Short answer: YIG believes a long-term investment holds the most value. (opinion not advice) 

Riding the short AZN term hype

Many investors locked in positions this week in anticipation of positive trial results. The word on Wall Street seemed to be positive. The results were positive, yet the sentiment is negative, producing an equation that does not make sense. However, YIG would like to point out that the sell-off is likely investors taking a profit or institutions wishing to get the stock for a cheaper price. A similar scenario played out with Inovio Pharmaceuticals a while back. Thus if you are going to ride the AZN hype, it is best to take profits before the announcement or set an unnegotiable profit target.

Shorting a possible Astra sell-off

COVID-19 stocks are always pulling back on their meteoric surge, allowing many bears to profit. The hype around AZN this week brought the bears out of hiding. It seems the bears won the morning battle. However, the overall trend for Astra Zeneca is bullish, especially after positive Phase I trial results (opinion not advice). Thus, people looking to short over the next few days might want to be cautious. Because in reality, many investors play two sides of the market. Once the bears claw AZN down to an attractive price, the institutions and everyday investor pour even more money in. Thus, the possibility you decide to short AZN but then get caught in a bull run is possible. Therefore, investors looking to short should wait for another week of hype instead of shorting on the current delcine, so you can mitigate losses.

Investing for the long-term

Considering the stock is on a downward trend, it should not be long before the bulls get back in. However, that could be days or even weeks, so don’t count on an instant reversal. In saying that, bearish movement is music to the ears of long-term investors. Because if you believe AZN will continue to rise, then the next few days could provide an opportunity to snap up discounted shares. Also, AZN’s earnings are on the 30th of July, meaning investors could see another all-time high. (Opinion not advice)

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The information above should not be taken as financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you. 

Written by Patrick McLoughlin, Senior Manager of YIG.

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