> 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 believe EPS should grow at a c12% EPS CAGR to 2022 as it emerges from its patent cliff and margins grow. • Best-in-class pipeline. Exceptional data on new oncology portfolio puts AZ in a strong position despite MYSTIC failure. - Expectations for the overall survival readout of MYSTIC in 1H18 are low, so this is close to a free option in our view. A positive would deliver >10% upside. - The new portfolio, plus other growth products, should add >$2bn in incremental sales in 18E. • Substantial margin leverage momentum improvement. Several new launches leverage existing infrastructure and thus will have very high 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 earnings expectations. • The best-in-class growth justifies a larger premium than at present. The shares trade on 17x 18E PIE vs. 16x for peers. • Multiple catalysts from pipeline. Data on existing drugs Imfinzi and Lymparza in 1Q18, plus readouts on two potential blockbusters in roxadustat (anemia in chronic kidney disease) and anifrolumab (lupus) in the next 12 months. Related DB Research: Lynparza survey supports market leadership in potential >$7bn class; Buy (Parkes) Pharma: 2018 Outlook: Fundamentals solid but fewer debates than in prior years 1Parkesi Bull/bear case: limited downside, substantial upside potential 7500p 6500p 5500p - 4500p 3500p - 2500p - 1500p Bear Source: Deutsche Bank Pipeline -ye Mystic -ye :,Ilate Nice 1083p 228p 513p MI 5700p ■285p NMI= PM.. VP.. 513 Base Tagrisso Mystic +ye Pipeline Bull success Bull Substantial EPS acceleration from 2018 driven by top-line growth 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 2015A 2016A 2017E 2018E 2019E 2020E 2021E 202