ii view: AstraZeneca - cancer drug sales jump by a quarter

Covid-19 is proving both a help and a hinderance, but sales and earnings continue to grow. 

Second-quarter results to 30 June 2020

• Revenue up 8% to $6.28 billion
• Core or adjusted earnings per share (EPS) up 32% to $0.96
• Unchanged first interim dividend of $0.90 (69.6p) per share

Guidance:

• Financial guidance for FY 2020 is unchanged
• Revenue is expected to increase by a high single-digit to a low double-digit percentage
• Core EPS is expected to increase by a mid-to high-teens percentage

Chief executive Pascal Soriot said:

"I want to thank my colleagues around the world for producing a strong performance in the first half of the year, delivering further revenue growth and another step forward in profitability and cash generation. I was particularly pleased with the robust growth in Emerging Markets and the success of our new medicines. 

"Furthermore, our company has mounted a significant response to Covid-19, with capacity to deliver over two billion doses of AZD1222.

"Looking ahead, while we continue to anticipate variations in quarterly performance, the continuation of our strategy makes us confident about the future. We are retaining our full-year guidance that is underpinned by the focus on commercial execution and an exciting pipeline of new medicines."

ii round-up:

Drugs maker AstraZeneca (LSE:AZN) today reported second-quarter results which beat City forecasts, again aided by heightened demand amidst the Covid-19 pandemic.

The Cambridge based company, which is working with Oxford University to develop a Covid-19 vaccine, continued to benefit from moves by hospitals to top-up their store cupboards and fight other conditions which can aid coronavirus. 

Astra shares gained by more than 1.5% in early UK trading having risen by nearly 30% since late March. Shares for fellow pharma companies GlaxoSmithKline (LSE:GSK) and Hikma (LSE:HIK) are up 13% and 26% respectively over the same period. 

Oncology or cancer related drug sales rose by 25% to $2.8 billion and accounted for 45% of total group sales. Sales for lung cancer drug Tagrisso jumped by a third to of over $1 billion. 

Cardiovascular, renal and metabolism treatment sales improved by 10% to $1.16 billion and accounted for a fifth of total sales. 

But disappointingly, in its third core category of respiratory & immunology treatments, Pulmicort sales fell by 78%, hit by a benign influenza season in China and the impact of Covid-19 on hospital nebulisation procedures. 

On a geographical basis, sales for its biggest emerging markets region, increased by 6%, with China sales up 7%, while US and European sales improved by 10% and 12% respectively.  

Astra remains on track for a third consecutive year of sales growth.

Management declared an unchanged interim or half year dividend of 90 US cents (69.6p) per share. It has paid an unchanged dividend of $2.80 ($0.90 + $1.90) for the last five years. 

Third-quarter results are scheduled for 5 November.

ii view:

AstraZeneca is a global, science-led biopharmaceutical company. It is focused on the discovery, development and commercialisation of prescription medicines. The group employs over 60,000 people in more than 100 countries. It is listed on the London, Stockholm and New York stock exchanges. 

Its Covid-19 vaccine is being progressed on a non-profit basis during the pandemic. Coronavirus is both helping and hindering AstraZeneca. It has helped by leading to a stocking up of drugs to fight other conditions which can aid the virus. Hindered given its impact on hospital nebulisation procedures.

For investors, excitement created by developed new medicines and growing sales in the emerging markets has fuelled a re-rating of the shares. They now trade on a forward price/earnings (PE) ratio of just over 25 compared to a 10-year average of less than 15 and a forward PE of below 15 at rival GlaxoSmithKline. As such, the dividend yield is now more reflective of growth, although arguably still attractive at around 2.5% on a historical basis. In all, these latest results again appear to justify the heightened valuation, reflecting progress being made. 

Positives: 

• Oncology product sales account for over 40% of total sales
• Emerging Markets accounted for 34% of H1 sales, the US 33%

Negatives:

• Other medicine sales including those where patents have expired fell by 8%
• Respiratory & immunology sales retreated by 11% in Q2

The average rating of stock market analysts:

Buy