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AstraZeneca (AZN) Q3 Earnings Miss, Sales Beat, Stock Down
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AstraZeneca’s (AZN - Free Report) third-quarter 2021 core earnings of 54 cents per American depositary share (“ADS”) missed the Zacks Consensus Estimate of 63 cents. Core earnings of $1.08 per share rose 14% year over year on a reported basis and 15% at constant exchange rates (“CER”).
Total revenues, including rare disease drugmaker Alexion from Jul 21, were up 50% on a reported basis and 48% at CER to $9.87 billion in the quarter, driven by higher product sales and contribution from its COVID-19 vaccine. Revenues beat the Zacks Consensus Estimate of $9.82 billion. Excluding COVID-19 vaccine sales, total revenues were up 32% at CER.
Shares of AstraZeneca were down almost 4% in pre-market trading on Nov 12, following the mixed third-quarter results. So far this year, the company’s shares have gained 25.8% compared with an increase of 16.9% for the industry.
Image Source: Zacks Investment Research
All growth rates mentioned below are on a year-over-year basis and at CER.
Product Sales Rise
Product sales rose 47% at CER to $9.74 billion. Collaboration revenues were $125 million. Collaboration revenues included $1 million for roxadustat and $51 million for Enhertu (from partner Daiichi Sankyo).
Among AstraZeneca’s various therapeutic areas, Oncology product sales were up 17%. CVRM product sales were up 13% while the Respiratory & Immunology segment gained 25%. Rare disease product sales were up 6%. Sales of other medicines declined 28%.
Sales in Detail
In Oncology, Lynparza product revenues rose 25% year over year to $588 million on the back of a strong uptake in prostate cancer and first-line ovarian cancer in the United States. Meanwhile, additional reimbursements, increasing BRCAm-testing rates and successful launch in first-line ovarian cancer in Europe also boosted sales. The drug is the leading PARP-inhibitor drug in the United States.
AstraZeneca markets Lynparza in partnership with Merck (MRK - Free Report) . The profit-sharing deal between Merck and AstraZeneca was formed in 2017. In addition to Lynparza, it included Koselugo.
Merck and AstraZeneca’s Lynparza, is approved for four cancer types, ovarian, breast, prostate and pancreatic. Lynparza is also being evaluated in an earlier-line setting for the approved cancer indications as well as some other cancer types
Tagrisso recorded sales of $1.25 billion, up 7% year over year on strong demand as an adjuvant therapy for treating lung cancer patients (approved in 2020), partially offset by lower new patient diagnoses due to the impact of COVID-19 in the United States.
Imfinzi generated sales of $618 million in the quarter, up 15% year over year driven by increased demand for ES-SCLC indication. COVID-19 continued to hurt lung cancer diagnoses rates, mainly in the United States.
Calquence generated sales of $354 million in the quarter compared with $280 million in the previous quarter.
Sales of AstraZeneca’s legacy cancer drugs — Iressa, Arimidex, Faslodex and Casodex — declined during the quarter. However, sales of Zoladex were up 5%.
In CVRM, Brilinta/Brilique sales were $375 million in the reported quarter, down 4% year over year, primarily due to the impact of COVID-19 (reflecting fewer elective procedures) and pricing pressure from the VBP (volume-based procurement) program in China.
Farxiga recorded product sales of $796 million in the quarter, up 48% year over year, reflecting SGLT2 inhibitor class growth and volume growth across all regions. The recent label expansion approvals for heart failure with reduced ejection fraction (HFrEF) and chronic kidney disease (CKD) indications contributed to Farxiga’s sales growth in the United States and Europe. The inclusion of Farxiga on the NRDL in China boosted sales in emerging markets.
Bydureon sales decreased 13% to $95 million. Sales of older CVRM medicines, Crestor and Seloken/Toprol-XL declined 4% and 2%, respectively, in the quarter.
In Respiratory & Immunology, Symbicort sales rose 11% in the quarter to $676 million due to early signs of a recovery in the ICS/LABA market and a stable market share in the United States despite COVID-19 related pressure on class growth. Pulmicort sales gained 36% to $217 million.
Fasenra recorded sales of $322 million in the quarter, up 33% year over year, reflecting a recovery in new patient starts, mainly in the United States.
AstraZeneca’s new triple combo COPD treatment, Breztri recorded sales of $47 million in the quarter compared with $56 million in the previous quarter.
In the Rare Disease portfolio added with Alexion’s acquisition, Soliris recorded sales of $798 million, down 2% year over year. Ultomiris and Strensiq sales were $297 million and $159 million, up 31% and 8%, respectively.
In Other Medicines, sales of Nexium declined 36% to $259 million. Synagis rose 5% to $122 million. Seroquel sales declined 30% to $24 million.
Profit Discussion
AstraZeneca’s core gross margin of 74.5% was down 5 percentage points at CER. Core selling, general and administrative (SG&A) expenses increased 29% to $2.87 billion.
Core research and development (R&D) expenses rose 46% to $2.15 billion. Core operating profit rose 28% to $2.28 billion in the quarter. The Core operating margin decreased 4 percentage points to 23.1% in the quarter.
2021 Guidance Maintained
AstraZeneca maintained its previously issued guidance, which includes the impact of the Alexion acquisition. The company continues to expect total revenues to increase by a low-20s percentage. The guidance did not include any future sales from the COVID-19 Vaccine.
However, including COVID vaccine revenues in the fourth quarter, total revenues are expected to grow by a mid-to-high 20s percentage in 2021.
Core earnings are expected to remain between $5.05 and $5.40 per share, unchanged from the previous expectations.
Our Take
AstraZeneca’s third-quarter results were mixed as it beat estimates for sales but missed the same for earnings. Product sales growth was driven by higher sales of newer medicines across Oncology and CVRM units like Tagrisso and Farxiga, which offset some negative impacts from the pandemic and slower sales growth in China. The addition of Alexion also aided sales growth.
The company’s COVID-19 vaccine added $1.05 billion to revenues and one cent to earnings per share in the third quarter. AstraZeneca expects the vaccine to move to “modest profitability” as new orders are received, starting from the fourth quarter. It produced the vaccine at cost amid the pandemic. COVID vaccine revenues in the fourth quarter are expected to be a mix of original pandemic agreements as well as new orders.
AstraZeneca has also made significant progress with its late-stage pipeline, reporting eight positive phase III trial results across seven medicines in the third quarter.
Zacks Rank & Stocks to Consider
AstraZeneca currently carries a Zacks Rank #5 (Strong Sell).
Earnings estimates for Roche’s 2021 earnings have increased from $2.76 to $2.78 per share for 2021, while the same for 2022 have moved up from $2.80 to $2.82 per share over the past 60 days. Roche’s stock is up 14.9% this year so far.
Earnings estimates for Glaxo’s 2021 earnings have increased from $2.77 to $3.01 per share for 2021, while the same for 2022 have moved up from $3.07 to $3.24 per share over the past 60 days.
Glaxo’s stock has risen 17.4% this year. Glaxo has delivered a four-quarter average earnings surprise of 15.28%.
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AstraZeneca (AZN) Q3 Earnings Miss, Sales Beat, Stock Down
AstraZeneca’s (AZN - Free Report) third-quarter 2021 core earnings of 54 cents per American depositary share (“ADS”) missed the Zacks Consensus Estimate of 63 cents. Core earnings of $1.08 per share rose 14% year over year on a reported basis and 15% at constant exchange rates (“CER”).
Total revenues, including rare disease drugmaker Alexion from Jul 21, were up 50% on a reported basis and 48% at CER to $9.87 billion in the quarter, driven by higher product sales and contribution from its COVID-19 vaccine. Revenues beat the Zacks Consensus Estimate of $9.82 billion. Excluding COVID-19 vaccine sales, total revenues were up 32% at CER.
Shares of AstraZeneca were down almost 4% in pre-market trading on Nov 12, following the mixed third-quarter results. So far this year, the company’s shares have gained 25.8% compared with an increase of 16.9% for the industry.
All growth rates mentioned below are on a year-over-year basis and at CER.
Product Sales Rise
Product sales rose 47% at CER to $9.74 billion. Collaboration revenues were $125 million. Collaboration revenues included $1 million for roxadustat and $51 million for Enhertu (from partner Daiichi Sankyo).
Among AstraZeneca’s various therapeutic areas, Oncology product sales were up 17%. CVRM product sales were up 13% while the Respiratory & Immunology segment gained 25%. Rare disease product sales were up 6%. Sales of other medicines declined 28%.
Sales in Detail
In Oncology, Lynparza product revenues rose 25% year over year to $588 million on the back of a strong uptake in prostate cancer and first-line ovarian cancer in the United States. Meanwhile, additional reimbursements, increasing BRCAm-testing rates and successful launch in first-line ovarian cancer in Europe also boosted sales. The drug is the leading PARP-inhibitor drug in the United States.
AstraZeneca markets Lynparza in partnership with Merck (MRK - Free Report) . The profit-sharing deal between Merck and AstraZeneca was formed in 2017. In addition to Lynparza, it included Koselugo.
Merck and AstraZeneca’s Lynparza, is approved for four cancer types, ovarian, breast, prostate and pancreatic. Lynparza is also being evaluated in an earlier-line setting for the approved cancer indications as well as some other cancer types
Tagrisso recorded sales of $1.25 billion, up 7% year over year on strong demand as an adjuvant therapy for treating lung cancer patients (approved in 2020), partially offset by lower new patient diagnoses due to the impact of COVID-19 in the United States.
Imfinzi generated sales of $618 million in the quarter, up 15% year over year driven by increased demand for ES-SCLC indication. COVID-19 continued to hurt lung cancer diagnoses rates, mainly in the United States.
Calquence generated sales of $354 million in the quarter compared with $280 million in the previous quarter.
Sales of AstraZeneca’s legacy cancer drugs — Iressa, Arimidex, Faslodex and Casodex — declined during the quarter. However, sales of Zoladex were up 5%.
In CVRM, Brilinta/Brilique sales were $375 million in the reported quarter, down 4% year over year, primarily due to the impact of COVID-19 (reflecting fewer elective procedures) and pricing pressure from the VBP (volume-based procurement) program in China.
Farxiga recorded product sales of $796 million in the quarter, up 48% year over year, reflecting SGLT2 inhibitor class growth and volume growth across all regions. The recent label expansion approvals for heart failure with reduced ejection fraction (HFrEF) and chronic kidney disease (CKD) indications contributed to Farxiga’s sales growth in the United States and Europe. The inclusion of Farxiga on the NRDL in China boosted sales in emerging markets.
Bydureon sales decreased 13% to $95 million. Sales of older CVRM medicines, Crestor and Seloken/Toprol-XL declined 4% and 2%, respectively, in the quarter.
In Respiratory & Immunology, Symbicort sales rose 11% in the quarter to $676 million due to early signs of a recovery in the ICS/LABA market and a stable market share in the United States despite COVID-19 related pressure on class growth. Pulmicort sales gained 36% to $217 million.
Fasenra recorded sales of $322 million in the quarter, up 33% year over year, reflecting a recovery in new patient starts, mainly in the United States.
AstraZeneca’s new triple combo COPD treatment, Breztri recorded sales of $47 million in the quarter compared with $56 million in the previous quarter.
In the Rare Disease portfolio added with Alexion’s acquisition, Soliris recorded sales of $798 million, down 2% year over year. Ultomiris and Strensiq sales were $297 million and $159 million, up 31% and 8%, respectively.
In Other Medicines, sales of Nexium declined 36% to $259 million. Synagis rose 5% to $122 million. Seroquel sales declined 30% to $24 million.
Profit Discussion
AstraZeneca’s core gross margin of 74.5% was down 5 percentage points at CER. Core selling, general and administrative (SG&A) expenses increased 29% to $2.87 billion.
Core research and development (R&D) expenses rose 46% to $2.15 billion. Core operating profit rose 28% to $2.28 billion in the quarter. The Core operating margin decreased 4 percentage points to 23.1% in the quarter.
2021 Guidance Maintained
AstraZeneca maintained its previously issued guidance, which includes the impact of the Alexion acquisition. The company continues to expect total revenues to increase by a low-20s percentage. The guidance did not include any future sales from the COVID-19 Vaccine.
However, including COVID vaccine revenues in the fourth quarter, total revenues are expected to grow by a mid-to-high 20s percentage in 2021.
Core earnings are expected to remain between $5.05 and $5.40 per share, unchanged from the previous expectations.
Our Take
AstraZeneca’s third-quarter results were mixed as it beat estimates for sales but missed the same for earnings. Product sales growth was driven by higher sales of newer medicines across Oncology and CVRM units like Tagrisso and Farxiga, which offset some negative impacts from the pandemic and slower sales growth in China. The addition of Alexion also aided sales growth.
The company’s COVID-19 vaccine added $1.05 billion to revenues and one cent to earnings per share in the third quarter. AstraZeneca expects the vaccine to move to “modest profitability” as new orders are received, starting from the fourth quarter. It produced the vaccine at cost amid the pandemic. COVID vaccine revenues in the fourth quarter are expected to be a mix of original pandemic agreements as well as new orders.
AstraZeneca has also made significant progress with its late-stage pipeline, reporting eight positive phase III trial results across seven medicines in the third quarter.
Zacks Rank & Stocks to Consider
AstraZeneca currently carries a Zacks Rank #5 (Strong Sell).
AstraZeneca PLC Price, Consensus and EPS Surprise
AstraZeneca PLC price-consensus-eps-surprise-chart | AstraZeneca PLC Quote
Some better-ranked large drugmakers are Roche (RHHBY - Free Report) and Glaxo (GSK - Free Report) . While Glaxo carries a Zacks Rank of 1 (Strong Buy), Roche has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings estimates for Roche’s 2021 earnings have increased from $2.76 to $2.78 per share for 2021, while the same for 2022 have moved up from $2.80 to $2.82 per share over the past 60 days. Roche’s stock is up 14.9% this year so far.
Earnings estimates for Glaxo’s 2021 earnings have increased from $2.77 to $3.01 per share for 2021, while the same for 2022 have moved up from $3.07 to $3.24 per share over the past 60 days.
Glaxo’s stock has risen 17.4% this year. Glaxo has delivered a four-quarter average earnings surprise of 15.28%.