ii view: AstraZeneca extends shares rally after cancer drugs boost

First-quarter results to 31 March

• Currency adjusted revenue up 19% to $12.68 billion (£10.2 billion)
• Currency adjusted core earnings per share (EPS) up 13% to $2.06

Guidance:

• Continues to expects total 2024 revenues to increase by a low double-digit to low teens percentage
• Continues to expects core 2024 EPS to increase by a low double-digit to low teens percentage

Chief executive Pascal Soriot said:

“Our strong pipeline momentum continued and already this year we announced positive trial results for Imfinzi and Tagrisso that were unprecedented in lung cancer. We are also looking forward to seeing the results of several other important trials throughout the year.

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ii round-up:

Drug maker and UK's biggest company AstraZeneca (LSE:AZN) today detailed a strong start to the new financial year. 

First-quarter currency adjusted sales to late March climbed 17% to $12.68 billion, exceeding City forecasts of $11.82 billion, driven by double-digit growth across all its core drug franchises including oncology. That fuelled a 13% increase in currency adjusted core earnings per share to $2.06, beating estimates of $1.89.  

Shares in the FTSE 100 company rose 5% in UK trading, taking gains since their recent February low to over 25%. They were up 7% year-to-date coming into this latest news, which compares with an 11% gain for UK rival GSK (LSE:GSK) and 4% improvement for the FTSE 100 index.

Sales of its oncology, or cancer related treatments climbed 26% on a currency adjusted basis to $5.1 billion. Drug sales for its Cardiovascular, Renal and Metabolism (CVRM) category improved 23% on the same basis to $3 billion, while Vaccines and Immune Therapies and including Covid related treatments declined by 34% to $232 million. 

Geographically, US sales rose 19% to $5.1 billion, Europe grew 19% when adjusted for currency movements to $2.6 billion, with Emerging Market sales up 26% to $3.7 billion on the same basis. 

The Cambridge headquartered company repeated its 2024 forecast for revenue to increase by a low double-digit to low teens percentage and for core earnings per share to improve by a low double-digit to low teens percentage.

An investor day is scheduled for 21 May followed by interim results on 25 July. Broker Morgan Stanley reiterated its ‘overweight’ stance on the shares post the update, highlighting AstraZeneca as a ‘top pick.’  

ii view:

Founded in 1999 through a merger, Anglo-Swedish pharmaceutical and biotechnology company AstraZeneca today operates in over 100 countries. Employing over 85,000 people, it currently has around 182 investigational therapies at varied stages of clinical development. At its recent Annual General Meeting (AGM), it announced a 20 US cent, or 7% increase in the 2024 annual dividend payment to $3.10 per share, to be paid in two instalments. 

For investors, drug development is an expensive business and sales of Covid related products are in decline. Acquisitions such as its recent $2.4 billion purchase of Canadian cancer specialist Fusion are also not without risk, while GSK shares currently offer a forecast dividend yield of around 3.7% compared with Astra’s 2.2%.

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On the upside, cancer treatment sales remain buoyant, generating two-fifths of overall revenue in this latest quarter. Astra continues to win new drug approvals, sales on a geographical basis are diverse including growing sales in China, while takeovers such as its 2021 purchase of rare disease focused Alexion have expanded its diversity of drug treatments.

In all, AstraZeneca has given investors plenty of reasons to back the business and, with the consensus analyst fair value estimate above £129 per share, this FTSE 100 pharma giant looks to remain deserving of its place in diversified investor portfolios. 

Positives: 

• Potential to grow treatments such as those for obesity
• 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