ii view: is AstraZeneca share slump a buying opportunity?

Fourth-quarter results to 31 December

• Currency adjusted revenue up 8% to $12 billion
• Currency adjusted core earnings per share up 7% to $1.45
• A second interim dividend of $1.97 per share (156p), unchanged from the year before
• Total 2023 dividend payment of $2.90 per share, unchanged from 2022
• Net debt down 2% year-over-year to $22.5 billion

Guidance:

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

Chief executive Pascal Soriot said:

"As AstraZeneca celebrates its 25th anniversary, we are pleased to report another year of strong financial performance and scientific progress, with double-digit earnings growth, and investment in exciting areas of science, including antibody drug conjugates and cell therapies, that lay the foundations for long-term success.

“We expect another year of strong growth in 2024, driven by continued adoption of our medicines across geographies. Our differentiated and growing portfolio of approved medicines, global reach and rich R&D pipeline give us confidence that we will continue to deliver industry-leading growth."

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ii round-up:

Drug maker AstraZeneca (LSE:AZN) today detailed increased sales led by its array of cancer treatments, but earnings were below City forecasts, hindered by higher costs linked to new product launches and ongoing R&D expenses. 

A near one-quarter rise in cancer drug sales to $4.9 billion pushed overall revenue up 8% to $12 billion, taking currency adjusted fourth-quarter core earnings up 7% year-over-year to $1.45. However, City analysts were looking for $1.50 per share. 

Shares in Astra, which battles with Shell (LSE:SHEL) for the title of UK’s largest company by stock market value, fell by around 7% in UK trading. It was down almost 6% in 2023, although fellow Covid vaccine maker Pfizer Inc (NYSE:PFE) almost halved in value last year. 

Astra's total fourth-quarter sales, stripped of its Covid vaccine impact, rose 16% year-over-year. Sales of other important treatment categories such as those for Cardiovascular, Renal and Metabolism (CVRM) climbed 18% to $2.7 billion, with sales for Rare Diseases improving 9% to $1.97 billion, boosted by its takeover of US specialist Alexion.

Geographically, European sales led growth during the quarter, rising 17% to $2.9 billion, followed by China up 16% at $1.4 billion and US sales up 6% to $5.1 billion. 

AstraZeneca flagged the approval of three new medicines since the prior third quarter, with management’s expectation for both sales and core earnings to increase by a low double-digit to low-teens percentages in 2024, broadly matching existing City expectations. 

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The Cambridge headquartered company declared a dividend of $1.97 (156p) per share, leaving the total 2023 payment of $2.90 per share unchanged from 2022. 

Broker Morgan Stanley reiterated its ‘overweight’ stance on the shares post the results, flagging Astra’s focus on investing for long-term revenue growth. 

First-quarter results are scheduled for 25 April, with an investor day to follow on 21 May. 

ii view:

Founded in 1999 through a merger, Anglo-Swedish pharmaceutical and biotechnology company AstraZeneca today operates in over 100 countries. The USA continues to generate its biggest slug of sales at just over two-fifths, followed by Europe at around a fifth, both Emerging Markets and China at just over a tenth each, and the Rest of the World the balance.  

For investors, required investment costs in drug development continue to weigh and sales of its Covid related products are retreating. Acquisitions such as its previous $1.8 billion purchase of heart hypertension specialist CinCor, are not without risk, while rival GSK currently offers a forecast dividend yield of around 3.6% compared to 2.4% at Astra.

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More favourably, cancer treatment sales accounted for four-fifths of overall revenues during the latest financial year. New drug approvals continue to be seen, sales on a geographical basis remain diverse including growing sales in China, while takeovers such as its 2021 purchase of Alexion have expanded diversity of drug treatments.

For now, and with the consensus analyst estimate of fair value stood at over £130 per share, this FTSE 100 pharma giant looks to remain deserving of a 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