AstraZeneca (AZN) Beats on Q3 Earnings & Sales, Ups 2023 View
AstraZeneca’s AZN third-quarter 2023 core earnings of 87 cents per American depositary share (ADS) beat the Zacks Consensus Estimate of 80 cents. Core earnings of $1.73 per share rose 4% year over year on a reported basis and 9% at constant exchange rates (CER).
Total revenues amounted to $11.49 billion, up 5% on a reported basis and 6% at CER. Revenues beat the Zacks Consensus Estimate of $11.45 billion. Excluding COVID-19 medicines, total revenue increased 12% (13% at CER).
All growth rates mentioned below are on a year-over-year basis and at CER.
Rise in Product Sales
Product sales rose 5% at CER to $11.0 billion, driven by sales of its non-COVID products. Collaboration revenues were $97.0 million in the quarter, down 47%. Alliance revenues were up 75% year over year to $377 million.
Among AstraZeneca’s various therapeutic areas, Oncology product sales were up 17%. Cardiovascular, Renal and Metabolism (“CVRM”) product sales were up 16%, while the Respiratory & Immunology (“R&I”) segment rose 5%. Vaccines & Immune Therapies sales declined 65%. Rare disease product sales were up 14%. Sales of other medicines declined 32%.
Sales of Some Key Drugs
In Oncology, Tagrisso recorded sales of $1.47 billion, up 6% year over year, on strong demand as a first-line and adjuvant treatment. However, in China, sales were hurt by the National reimbursement drug list renewal price reductions and reduced promotional activities due to the government’s anti-corruption campaign, which hurt demand trends of some medicines. Tagrisso sales missed the Zacks Consensus Estimate of $1.53 billion as well as our model estimate of $1.54 billion.
Imfinzi generated sales of $1.13 billion in the quarter, up 54% year over year, driven by increased use in recent launches like biliary tract and hepatocellular carcinoma cancers. Product sales from Imjudo are included in the Imfinzi line, which are also contributing to sales growth. Imfinzi sales beat the Zacks Consensus Estimate of $1.06 billion as well as our estimate of $966.4 million.
Lynparza product revenues rose 8% year over year to $702 million, as increased market share was partially offset by declining use of PARP inhibitors class of drugs and some label restrictions for use in second-line ovarian cancer in the United States. Lynparza sales missed the Zacks Consensus Estimate and our estimate of $749.7 million and $748 million, respectively.
AstraZeneca markets Lynparza in partnership with Merck MRK. The profit-sharing deal between AstraZeneca and Merck was inked in 2017. AstraZeneca & Merck’s Lynparza is approved for four cancer types, namely ovarian, breast, prostate and pancreatic. In addition to Lynparza, the deal included Koselugo. In the quarter, AstraZeneca did not receive any milestone payment from partner Merck related to Lynparza.
Calquence generated sales of $654 million in the quarter, up 15% year over year, benefiting from increased demand. The drug’s sales missed the Zacks Consensus Estimate of $672 million but beat our model estimate of $651.4 million.
Among AstraZeneca’s legacy cancer drugs, sales of Zoladex rose 5% in the quarter, while Faslodex declined 16%.
In CVRM, Farxiga recorded product sales of $1.55 billion in the quarter, up 41% year over year, reflecting accelerated volume growth compared with the overall SGLT2 inhibitor class in general. The label expansion approvals for heart failure and chronic kidney disease indications contributed to Farxiga’s sales growth in the United States and Europe. In Emerging markets, Farxiga is witnessing solid growth despite generic competition. Farxiga sales beat the Zacks Consensus Estimate of $1.45 billion and our model estimate of $1.37 billion.
Brilinta/Brilique sales were $331 million in the reported quarter, down 1%. While sales in Europe were affected by clawbacks, sales declined in Canada due to generic erosion.
In R&I, Symbicort sales declined 10% in the quarter to $555.0 million due to generic erosion in the United States, Japan and Europe. Generics were launched in the United States in the third quarter. Pulmicort sales rose 7% to $148 million.
Fasenra recorded sales of $389 million in the quarter, up 10% year over year, as strong volume growth was offset by price weakness in some markets. Fasenra sales missed the Zacks Consensus Estimate of $410 million and our model estimate $417.7 million.
AstraZeneca’s triple combo COPD treatment Breztri recorded sales of $171 million, up 69% year over year, driven by market share growth.
In R&I, new drugs Saphnelo and Tezspire are also growing rapidly in their launch phases. Lupus drug, Saphnelo recorded sales of $76 million in the quarter compared with $68 million in the previous quarter, driven by demand growth in the U.S. market and ongoing launches in Europe and Japan.
In the Rare Disease portfolio, Soliris recorded sales of $781 million, down 12% year over year due to conversion to Ultomiris. Ultomiris revenues were $777 million, up 49%, driven by growth in neurology indications and geographic expansions in new markets. Strensiq sales were $285 million, up 21%, driven by strong patient demand.
In Other Medicines, sales of Nexium declined 17% to $244 million.
In Vaccines & Immune Therapies, the company did not generate any revenues from its COVID-19 vaccine Vaxzevria or its COVID-19 antibody cocktail medicine Evusheld. In July, the FDA approved AstraZeneca and partner Sanofi’s SNY respiratory syncytial virus (“RSV”) antibody Beyfortus (nirsevimab) to protect newborns and infants. In the quarter, AstraZeneca recorded $50 million as Beyfortus product sales from products supplied to Sanofi.
Profit Discussion
AstraZeneca’s core gross margin of 81.4% was up 1 percentage point at CER. The dilutive effect from profit-sharing arrangements was offset by a positive mix due to increased contribution from oncology and rare disease medicines. COVID-19 medications, which were dilutive to gross margin, declined substantially in the quarter, thereby improving the company’s gross margin mix. Core selling, general and administrative expenses increased 7% to $3.36 billion.
Core research and development expenses rose 5% to $2.48 billion due to increasing investment in the pipeline. Core operating profit was up 9% to $3.55 billion in the quarter. The core operating margin was 30.8% in the quarter, up 1 percentage point at CER.
2023 Guidance Raised
Management raised its financial guidance for 2023. AstraZeneca expects total revenues to increase at a mid-single-digit percentage in 2023 at CER, including its COVID products. Earlier, the company expected a low-to-mid single-digit percentage increase. Excluding COVID products, total revenues are expected to increase in a low-teens percentage versus the prior expectation of a low double-digit percentage.
Core earnings per share are expected to increase in the low double-digit to low-teens percentage at CER compared to the previous expectation of high single-digit to low double-digit percentage in 2023.
Foreign exchange is expected to have a low single-digit percentage (same as before) adverse impact on total revenues and a mid-single-digit adverse impact (previously low-to-mid single-digit adverse impact) on core EPS in 2023.
Our Take
AstraZeneca’s third-quarter results were impressive as it beat estimates for earnings and sales. Higher sales of key medicines across Oncology, CVRM and Rare Disease units were offset by a steep decline in sales of AstraZeneca’s COVID products. Approvals for new indications boosted sales growth of some key drugs like Imfinzi and Farxiga. However, revenues from cancer drugs, Tagrisso and Lynparza missed expectations. The company raised its full-year guidance for total revenues as well as for core EPS.
Shares of AstraZeneca were up around 0.9% on Nov 9 in response to the better-than-expected results. Year to date, the stock has decreased 5.5% against the industry’s 5.5% rise.
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To cash in on the rising demand for obesity drugs, AstraZeneca announced a deal to in-license exclusive rights to ECC5004, a novel oral GLP-1RA therapy, from private biotech Eccogene.
Zacks Rank & Stock to Consider
Currently, AstraZeneca has a Zacks Rank #3 (Hold).
AstraZeneca PLC Price and Consensus
AstraZeneca PLC price-consensus-chart | AstraZeneca PLC Quote
A better-ranked large drugmaker is Novo Nordisk NVO, which carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 30 days, estimates for Novo Nordisk’s 2023 earnings per share have increased from $2.51 to $2.62. During the same period, the earnings estimates per share for 2024 have risen from $2.95 to $3.07. Shares of Novo Nordisk are up 47.8% in the year-to-date period.
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