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AstraZeneca (AZN) Beats on Q4 Earnings, Guides for 2018

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AstraZeneca plc (AZN - Free Report) reported fourth-quarter 2017 core earnings of 65 cents per American Depositary Share (ADS), which beat the Zacks Consensus Estimate of 45 cents. Core earnings rose 13% year over year at constant exchange rates (CER). Higher product sales boosted profits in the quarter.

Total revenues rose 2% at CER to $5.78 billion in the reported quarter. Revenues also beat the Zacks Consensus Estimate of $5.59 billion. Revenue growth, however, was partially offset by decrease in externalization revenues.

Meanwhile, product sales rose 3% at CER in the quarter due to better performance of new products, partially offset by lower sales of legacy products.

Key growth platforms (representing 68% of total revenues) were up 12% in the quarter at CER. Among the key growth platforms, Emerging Markets, New Cardiovascular & Metabolic Diseases ("CVMD"), New Oncology and Japan performed well in the quarter.

All growth rates mentioned below are on a year-over-year basis and at CER.

Product Sales Impress

Crestor sales declined 7% to $594 million with sales in Europe down due to the entry of multiple generic versions of the drug in the market. The negative impact is expected to continue in Europe in 2018.

Seroquel XR sales declined 9% to $108 million due to competition from generic launches.

In the quarter, Onglyza sales rose 19% to $180 million driven by growth in emerging markets.

Symbicort sales remained flat in the quarter at $752 million as higher sales in emerging market were offset by lower sales in the United States. U.S. sales declined due to continued pricing pressure from managed-care access within the ICS/LABA class and also competition from other class like LAMA/LABA combination medicines.

Nexium recorded sales of $427 million, down 12%.

Other than Crestor and Seroquel XR, other legacy products that recorded decline in the quarter include Zoladex (down 21% to $187 million), Seloken/Toprol-XL (down 7% to $168 million), Casodex (down 8% to $54 million) and Atacand (down 10% to $73 million).

However, older drugs, which grew in the quarter include Iressa (up 8% to $130 million), Pulmicort (up 26% to $371 million), Faslodex (up 5% to $238 million) and Daliresp/Daxas (up 27% to $53 million).

Among the newer medicines, Lynparza sales rose 58% to $100 million. While sales in the United States gained from the label expansion approval in August for the treatment of second-line ovarian cancer, in Europe, sales were pushed higher by a number of successful launches. Please note that AstraZeneca shares Lynparza’s development cost and profits equally with Merck & Co., Inc. (MRK - Free Report) .

Brilinta/Brilique sales were $299 million in the reported quarter, up 24% year over year. Brilinta maintained its leadership position in the U.S. branded oral anti-platelet market. In the United States., Europe and China, Brilinta continued to display an impressive performance.

Tagrisso, launched in 2015, recorded sales of $304 million, up 105% year over year. Another new medicine, Movantik/Moventig recorded sales of $30 million in the quarter.

Bevespi, a LAMA/LABA in a pressurized metered dose inhaler launched commercially in the United States in January 2017, recorded sales of $8 million in the quarter, higher than $4 million in the third quarter amid slower-than-anticipated growth in LAMA/LABA class.

PD-L1 inhibitor Imfinzi, launched for second-line bladder cancer in the United States in May 2017, generated sales of $18 million in the fourth quarter. A regulatory application seeking label expansion of Imfinzi to treat an earlier stage of lung cancer was granted priority review by the FDA.

Imfinzi is a key candidate in the company’s immuno-oncology pipeline. The candidate is being evaluated for multiple cancers, either alone or in combination with other regimens. In October 2017, AstraZeneca expanded its clinical trial collaboration with Incyte (INCY - Free Report) to evaluate the latter’s investigational selective IDO1 enzyme inhibitor, epacadostat, in combination with Imfinzi, compared to Imfinzi alone in early lung cancer.

2017 Performance

Product sales declined 5% to $20.15 billion, primarily due to generic competition for Crestor and Seroquel XR and pricing pressure for Symbicort in the United States. European markets witnessed a 7% decline in sales to $4.75 billion. Revenues from Emerging Markets were up 8% to $6.15 billion primarily on the back of strong growth in China (up 15% to $2.96 billion). In Established ROW market, sales were flat at $3.08 billion.

Other Details

AstraZeneca’s core gross margin declined 10 basis points (bps) to 79.4%. Core selling, general and administrative (SG&A) expenses rose 5% to $2.18 billion.

In the quarter, core research and development (R&D) expenses declined 4% to $1.46 billion.

2018 Outlook

AstraZeneca provided EPS guidance for 2018, which is expected in the range of $1.65 to $1.75 per ADR. The Zacks Consensus Estimate stands at $1.71 per ADR. The company also expects revenues to grow in low single digit percentage.

Based on the average exchange rates in January 2018, currency movements are expected to favorably impact the top line by a low single-digit percentage but minimally impact core EPS.

Our Take

AstraZeneca’s fourth-quarter performance was impressive as it beat estimates for both earnings and sales.  It also provided an encouraging outlook for 2018. Revenues improved during 2017 and the company expects the trend to continue in 2018. AstraZeneca announced quite a few positive developments on the regulatory and pipeline front in the past year. Several readouts are expected in 2018. Backed by the positive news flow, in the past year, AstraZeneca’s shares have gained 25.9%, comparing favorably with the industry’s growth of 20.9%.

AstraZeneca carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Astrazeneca PLC Price, Consensus and EPS Surprise


Astrazeneca PLC Price, Consensus and EPS Surprise | Astrazeneca PLC Quote

A better-ranked company in the large-cap pharma industry is AbbVie Inc. (ABBV - Free Report) , carrying a Zacks Rank #1.

Shares of AbbVie are up 16.4% while earnings estimates for 2018 have gone up 12.7% over the past 30 days.

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