ii view: vaccine maker AstraZeneca confident enough to boost dividend

A diverse array of treatments with growth in emerging markets and an income yield of around 2.5%. Buy, hold or sell?

Fourth-quarter results to 31 December

• Revenue up 62% to $12 billion (£8.9 billion)
• Core earnings per share up 56% to $1.67
• Net debt doubles year-over-year to $24.32 billion (£18 billion)
• Dividend per share up 3.7% to $1.97 per share (£1.46 per share)
• Total dividend for the year of $2.87 per share (£2.12 per share)

Guidance:

• Expects full-year currency adjusted revenues to grow by a high-teens percentage
• Expects full-year core earnings to increase by mid-to-high twenties percentage 
• Expects to pay a 2022 total dividend of $2.90 per share, up from $2.80 during 2020

Chief executive Pascal Soriot said:

“AstraZeneca continued on its strong growth trajectory in 2021, with industry-leading R&D productivity, five of our medicines crossing new blockbuster thresholds, and the acquisition and integration of Alexion. We also delivered on our promise of broad and equitable access to our Covid-19 vaccine with 2.5 billion doses released for supply around the world, and we made good progress on reducing our greenhouse gas emissions.”

ii round-up:

Covid-19 vaccine maker AstraZeneca (LSE:AZN) today delivered robust fourth-quarter results, helped along by a first quarterly contribution from its $39 billion acquisition of US rare disease drug maker Alexion. 

Total fourth-quarter revenue rose 62% to $12 billion, with core adjusted earnings per share of $1.67 at the upper end of forecasts. Some 22 regulatory drug approvals during 2021 continued to underline its innovation, with a marginal planned 10 US cents increase in the annual dividend over 2022 also suggesting longer term confidence. 

AstraZeneca shares rose by more than 3% in UK trading, leaving them up by around a fifth over the last year. Shares for GlaxoSmithKline (LSE:GSK), which is soon to demerge its Consumer Healthcare business, are up by closer to 30% over that time while the FTSE 100 index has climbed by 17%.

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Sales for its cancer treating Lynparza drug grew 25% over the final quarter to just over $1 billion. Demand for its Renal and Metabolism (CVRM) related Farxiga treatment climbed 45% year-over-year to $849 million, while sales for rare disease treatment Soliris also breached $1 billion.

During the full year 2021 and across its 13 best-selling blockbuster medicines, five treatments crossed new sales thresholds including its cancer treatment Tagrisso at over $5 billion.

Geographically, double-digit sales were achieved across all major regions, and also taking in Emerging Markets despite some headwinds in China. 

Recent drug approvals, including for its Evusheld long-acting antibody combination authorised for emergency use in the US for the prevention of Covid-19, now feed into 2022 sales expectations. 

Management guidance for 2022 points to hopes for currency adjusted revenues to grow by a high-teens percentage and for core earnings to increase in percentage terms by mid-to-high twenties.

ii view:

AstraZeneca is a global, science-led biopharmaceutical company which operates in over 100 countries. Drug areas include oncology; Cardiovascular, Renal and Metabolism (CVRM); Respiratory and Immunology (RI) products and now rare diseases. Over 7,000 rare diseases are known of but only around 5% have US Food and Drug Administration-approved treatments. 

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For investors, while Astra’s development of a Covid vaccine should be applauded, time spent developing and distributing its coronavirus vaccine has been time away from its core business. The purchase of Alexion at what is considered a full price is also yet to be fully justified and has doubled net debt to over $24 billion. 

More favourably, Astra should be able to further leverage its own geographical footprint and extensive emerging markets presence to keep growing Alexion sales. The Covid vaccine has raised Astra’s global profile significantly with its previous not-for-profit status now being removed. For now, and with further innovation and new drug successes ongoing and analysts currently estimating a fair value share price of over £100, support for this pharma giant looks well deserved. 

Positives: 

• Cancer treatment sales now total over a third of overall sales
• Alexion adds to its diversity of drug treatments

Negatives:

• Other medicine sales including patents expiries fell 6% to $2.48 billion
• Debt has doubled due to the purchase of Alexion

The average rating of stock market analysts:

Strong buy