ii view: AstraZeneca raises annual sales and profit forecasts

Second-quarter results to 30 June

• Currency adjusted revenue up 17% to $12.93 billion
• Currency adjusted core earnings per share (EPS) down 3% to $1.98

Guidance:

• Now expects total 2024 revenues to increase by mid-teens percentage, up from previous low teens
• Now expects core 2024 EPS to increase by mid-teens percentage, up from low teens percentage

Chief executive Pascal Soriot said:

“Already this year we have announced five positive, potentially practice-changing Phase III studies that are anticipated to meaningfully contribute to our growth.

“In the year to date we have continued to make encouraging progress with several disruptive technologies, including antibody drug conjugates, bispecifics, cell and gene therapies, radioconjugates, and weight management medicines, all of which have the potential to drive our growth beyond 2030."

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ii round-up:

AstraZeneca (LSE:AZN) today detailed robust results, with the drugs maker increasing its full-year estimates for both revenue and core earnings. 

Currency adjusted revenue for the second quarter to the end of June rose 17% to $12.93 billion, driven by double-digit percentage growth for core drug areas including oncology (cancer treatments). Annual revenue and core earnings are now expected to produce mid-teens percentage growth, up from a previous prediction for low-teens. 

Shares in the UK’s largest company by stock market value (currently £183 billion) fell 3% in UK trading given weaker markets generally and having come into this latest news up 15% year-to-date. That compares to a gain of 4% for UK rival GSK (LSE:GSK) and 5% for the FTSE 100 index itself in 2024. 

Sales of Astra’s oncology related treatments climbed 19% on a currency adjusted basis to $5.3 billion. Drug sales in its Cardiovascular, Renal and Metabolism (CVRM) category improved 22% on the same basis to $3.2 billion, while sales for Respiratory & Immunology therapies improved 26% to $1.9 billion. Vaccines and Immune treatment revenue halved to $119 million given reduced demand for Covid related products. 

The Cambridge headquartered company raised its interim dividend payment to $1.00 per share from last year’s $0.93 per share.  

Geographically, US sales rose 17% to $5.6 billion, European sales grew 24% when adjusted for currency movements to $2.7 billion, with China sales up 18% to $1.6 billion on the same basis.

Broker Morgan Stanley reiterated its ‘overweight’ stance on the shares post the update, highlighting AstraZeneca as a ‘top pick.’  Third-quarter results are scheduled for 12 November. 

ii view:

Founded in 1999 through a merger, Anglo-Swedish pharmaceutical and biotechnology company AstraZeneca today operates in over 100 countries. It currently has over 180 investigational therapies in its pipeline with 20 new molecular entities at late-stage development. At an investor day in May, management flagged plans to grow revenue to $80 billion by 2030, up from $45.6 billion in 2023, and driven by the potential launch of 20 new medicines. 

For investors, drug development is an expensive business, with such costs weighing on earnings, while litigation and government investigations carry risk across the industry. Takeovers such as its relatively recent $1.05 billion purchase of rare endocrine disease specialist Amolyt Pharma are also not without risk, while GSK shares currently offer a forecast dividend yield of around 4% compared with Astra’s 2%. 

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On the upside, cancer treatment sales remain buoyant, generating just over two-fifths of overall revenue in this latest quarter. Drug development, such as that for potential weight management treatments, is ongoing. Sales on a geographical basis are diverse including growing sales in China and the emerging markets, while takeovers such as its 2021 purchase of rare disease focused Alexion have expanded its range of drug treatments.

For now, and despite continued risks, an ambitious sales growth target out to 2030 and a consensus analyst fair value estimate above £137 per share leaves this FTSE 100 giant deserving of it place in diversified investor portfolios. 

Positives: 

• A potential 20 new medicines by 2030
• Acquisitions adding to diversity of drug treatments

Negatives:

• Involved in various legal proceedings considered typical to its business, including litigation and government investigations
• Currency movements can hinder

The average rating of stock market analysts:

Buy