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AstraZeneca's (AZN) Q2 Earnings and Sales Beat, Stock Up
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AstraZeneca plc (AZN - Free Report) beat the Zacks Consensus Estimate for both earnings and sales in the second quarter of 2018. The product sales were driven by strong growth in new medicines and emerging markets, offset by declining sales of its cholesterol drug, Crestor. The Swiss pharma giant maintained its previously issued outlook for 2018, indicating improved growth in the second half. The stock rose almost 2.2% in pre-market trading on Jul 26.
This year so far, AstraZeneca’s shares have risen 7.9% compared with the industry’s increase of 0.9%.
Second-quarter 2018 core earnings of 35 cents per American Depositary Share (“ADS”) beat the Zacks Consensus Estimate of 31 cents. Core earnings per share of 69 cents declined 26% year over year at constant exchange rates (“CER”) hurt by lower revenues and operating profit.
Total revenues declined 1% at CER to $5.16 billion in the reported quarter due to unfavorable currency movement. Revenues, however, beat the Zacks Consensus Estimate of $4.99 billion.
All growth rates mentioned below are on a year-over-year basis and at CER.
Product Sales Decline
Product sales declined 1% at CER in the quarter to $5.03 billion. Higher sales of newer medicines and strong performance in China were offset by lower sales of many legacy medicines, especially rapid erosion in sales of Crestor. Externalization revenues were $125 million in the quarter, up 14%.
Externalization revenues are the revenues arising from AstraZeneca’s externalization agreements.
Older Products
Crestor sales declined 42% to $338 million, with the United States accounting for $44 million (up 7%) and Europe contributing $46 million (down 74% at CER). U.S. and Europe sales were weak as multiple generic versions of the drug entered the market. However, sales in China rose on the back of strong demand.
Seroquel XR sales declined 21% to $76 million due to competition from generic launches. In May, the company entered into an agreement to sell rights to the drug in UK, China and certain other markets with China-based Luye Pharma.
Symbicort sales declined 8% in the quarter to $672 million due to fall in sales worldwide. Symbicort sales in the United States declined 14% in the quarter due to pricing pressure and the unfavorable timing of government buying. Sales in Europe fell 9% due to stiff competition. However, the drug maintained its leadership in terms of volume in its class of medicine.
Nexium recorded sales of $442 million, down 28% due to declining sales in the United States and Europe.
Other key legacy products that recorded sales decline in the quarter include Faslodex (down 3% to $247 million), Casodex (down 9% to $52 million), Seloken (down 7% to $173 million), Atacand (down 10% to $66 million), Daliresp/Daxas (down 8% to $45 million) and Synagis (down 63% to $26 million).
A few older drugs grew in the quarter including Zoladex (up 4% to $192 million) and Pulmicort (up 20% to $287 million).
Newer Products
Among the newer medicines, Lynparza sales rose 26.1% sequentially to $150 million in the quarter. Sales in the United States surged 25.8% quarter-over-quarter to $83 million, gaining from recent label expansion approvals. In Europe, sales rose 7.1% from previous quarter, pushed higher by a number of successful launches, high BRCA-testing rates and increased penetration. In 2018, Lynparza received approval in Japan for both ovarian cancer and breast cancer and for second indication in the United States in breast cancer. These approvals should continue to drive sales further in 2018. Please note that AstraZeneca has a partnership agreement with Merck (MRK - Free Report) for Lynparza.
Brilinta/Brilique sales were $316 million in the reported quarter, up 13% year over year. Brilinta maintained its leadership position in the U.S. branded oral anti-platelet market as well as in a number of European markets.
Farxiga recorded sales of $340 million in the quarter, up 34% as the medicine continued to lead the market in terms of volume.
New respiratory product, Fasenra continued its strong start, recording sales of $65 million in the quarter, supported by strong launch and uptake in United States. Fasenra was approved in the United States in November last year and in the EU and Japan in January this year.
In the quarter, Onglyza sales declined 18% to $126 million, reflecting pressure on DPP-4 class and increased competitive pressure from classes of diabetes medicines whose label includes CV benefits.
Tagrisso recorded sales of $422 million, up 77% year over year driven by rapid uptake in first-line advanced lung cancer (NSCLC) indication in the United States and in second-line setting in China. Last month, AstraZeneca secured an EU approval for Tagrisso in the first-line setting for advanced lung cancer, which can further boost sales in the future quarters.
Among other new medicines, Movantik/Moventig recorded sales of $24 million in the quarter, down 25%, while Iressa sales declined 1% to $143 million. Bydureon sales increased 5% to $155 million in the quarter while Byetta sales were down 35% to $29 million.
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 $5 million in the previous quarter amid slower-than-anticipated growth in LAMA/LABA class.
PD-L1 inhibitor Imfinzi generated sales of $122 million in the second quarter of 2018 compared with $62 million in the first quarter of 2018. In February, Imfinzi was approved and immediately launched for the second indication in the United States — early stage lung cancer (NSCLC) — which drove sales in the second quarter. Imfinzi was launched for the second-line treatment of advanced bladder cancer in the United States in May 2017.
Calquence, which was launched in the United States in October last year, generated sales of $12 million in the second quarter compared with $8 million in the previous quarter.
Regional Performance
In the United States, product sales were up 6% to $1.62 billion as higher sales of newer products were partially offset by lower Symbicort sales. However, European markets witnessed a 17% decline in sales to $1.03 billion due to weak Crestor sales. Revenues from Emerging Markets were up 12% to $1.66 billion, primarily on the back of strong growth in China (up 26% to $868 million) while sales remained flat in ex-China markets amid challenging conditions in the healthcare market in Russia, the Middle East and Africa. In Established ROW market (comprising Japan, Canada and other markets), sales declined 15% to $723 million.
Profit Discussion
AstraZeneca’s core gross margin declined 100 basis points (bps) to 81.3%. Core selling, general and administrative (SG&A) expenses rose 8% to $2.13 billion due to investment in product launches.
In the quarter, core research and development (R&D) expenses rose 1% to $1.32 billion. Operating margin declined 610 bps to 24.5% in the quarter.
2018 Outlook
AstraZeneca maintained its previously issued earnings and sales outlook.
AstraZeneca expects core EPS for 2018 in the range of $1.65 to $1.75 per ADR. The company expects product sales to grow in low single digit percentage. However, product sales growth is expected to improve in the second half of the year.
AstraZeneca is hopeful that the effects of the Crestor patent expiration in Europe and Japan will recede materially in the second half
Management guided that total externalization revenues and other income in 2018 will be less than 2017.
Currency movements are expected to favorably impact product sales and core earnings per share by a low single-digit percentage.
While adjusted R&D costs are expected to be in line or decline in a low single-digit percentage range from 2017 levels, the company anticipates SG&A costs to increase by a low to mid-single digit percentage to support product launches like Fasenra and Imfinzi.
The company expects restructuring costs and capital expenditure to decline through the rest of the year.
Adjusted tax rate is expected to be in the range of 16%-20% compared with 14% for 2017.
Some better-ranked pharma/biotech stocks include Gilead Sciences, Inc. (GILD - Free Report) and Eli Lilly (LLY - Free Report) . While Gilead has a Zacks Rank #1, Lilly is a #2 Ranked (Buy) stock.
Gilead’s earnings estimates have risen from $6.09 to $6.15 for 2018 and from $6.31 to $6.33 for 2019 over the past 60 days. The stock has gained 10.2% this year so far.
Lilly’s earnings estimates have increased from $5.15 to $5.20 for 2018 and from $5.46 to $5.55 for 2019 over the past 60 days. The stock has gained 14.2% this year so far.
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Image: Bigstock
AstraZeneca's (AZN) Q2 Earnings and Sales Beat, Stock Up
AstraZeneca plc (AZN - Free Report) beat the Zacks Consensus Estimate for both earnings and sales in the second quarter of 2018. The product sales were driven by strong growth in new medicines and emerging markets, offset by declining sales of its cholesterol drug, Crestor. The Swiss pharma giant maintained its previously issued outlook for 2018, indicating improved growth in the second half. The stock rose almost 2.2% in pre-market trading on Jul 26.
This year so far, AstraZeneca’s shares have risen 7.9% compared with the industry’s increase of 0.9%.
Second-quarter 2018 core earnings of 35 cents per American Depositary Share (“ADS”) beat the Zacks Consensus Estimate of 31 cents. Core earnings per share of 69 cents declined 26% year over year at constant exchange rates (“CER”) hurt by lower revenues and operating profit.
Total revenues declined 1% at CER to $5.16 billion in the reported quarter due to unfavorable currency movement. Revenues, however, beat the Zacks Consensus Estimate of $4.99 billion.
All growth rates mentioned below are on a year-over-year basis and at CER.
Product Sales Decline
Product sales declined 1% at CER in the quarter to $5.03 billion. Higher sales of newer medicines and strong performance in China were offset by lower sales of many legacy medicines, especially rapid erosion in sales of Crestor. Externalization revenues were $125 million in the quarter, up 14%.
Externalization revenues are the revenues arising from AstraZeneca’s externalization agreements.
Older Products
Crestor sales declined 42% to $338 million, with the United States accounting for $44 million (up 7%) and Europe contributing $46 million (down 74% at CER). U.S. and Europe sales were weak as multiple generic versions of the drug entered the market. However, sales in China rose on the back of strong demand.
Seroquel XR sales declined 21% to $76 million due to competition from generic launches. In May, the company entered into an agreement to sell rights to the drug in UK, China and certain other markets with China-based Luye Pharma.
Symbicort sales declined 8% in the quarter to $672 million due to fall in sales worldwide. Symbicort sales in the United States declined 14% in the quarter due to pricing pressure and the unfavorable timing of government buying. Sales in Europe fell 9% due to stiff competition. However, the drug maintained its leadership in terms of volume in its class of medicine.
Nexium recorded sales of $442 million, down 28% due to declining sales in the United States and Europe.
Other key legacy products that recorded sales decline in the quarter include Faslodex (down 3% to $247 million), Casodex (down 9% to $52 million), Seloken (down 7% to $173 million), Atacand (down 10% to $66 million), Daliresp/Daxas (down 8% to $45 million) and Synagis (down 63% to $26 million).
A few older drugs grew in the quarter including Zoladex (up 4% to $192 million) and Pulmicort (up 20% to $287 million).
Newer Products
Among the newer medicines, Lynparza sales rose 26.1% sequentially to $150 million in the quarter. Sales in the United States surged 25.8% quarter-over-quarter to $83 million, gaining from recent label expansion approvals. In Europe, sales rose 7.1% from previous quarter, pushed higher by a number of successful launches, high BRCA-testing rates and increased penetration. In 2018, Lynparza received approval in Japan for both ovarian cancer and breast cancer and for second indication in the United States in breast cancer. These approvals should continue to drive sales further in 2018. Please note that AstraZeneca has a partnership agreement with Merck (MRK - Free Report) for Lynparza.
Brilinta/Brilique sales were $316 million in the reported quarter, up 13% year over year. Brilinta maintained its leadership position in the U.S. branded oral anti-platelet market as well as in a number of European markets.
Farxiga recorded sales of $340 million in the quarter, up 34% as the medicine continued to lead the market in terms of volume.
New respiratory product, Fasenra continued its strong start, recording sales of $65 million in the quarter, supported by strong launch and uptake in United States. Fasenra was approved in the United States in November last year and in the EU and Japan in January this year.
In the quarter, Onglyza sales declined 18% to $126 million, reflecting pressure on DPP-4 class and increased competitive pressure from classes of diabetes medicines whose label includes CV benefits.
Tagrisso recorded sales of $422 million, up 77% year over year driven by rapid uptake in first-line advanced lung cancer (NSCLC) indication in the United States and in second-line setting in China. Last month, AstraZeneca secured an EU approval for Tagrisso in the first-line setting for advanced lung cancer, which can further boost sales in the future quarters.
Among other new medicines, Movantik/Moventig recorded sales of $24 million in the quarter, down 25%, while Iressa sales declined 1% to $143 million. Bydureon sales increased 5% to $155 million in the quarter while Byetta sales were down 35% to $29 million.
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 $5 million in the previous quarter amid slower-than-anticipated growth in LAMA/LABA class.
PD-L1 inhibitor Imfinzi generated sales of $122 million in the second quarter of 2018 compared with $62 million in the first quarter of 2018. In February, Imfinzi was approved and immediately launched for the second indication in the United States — early stage lung cancer (NSCLC) — which drove sales in the second quarter. Imfinzi was launched for the second-line treatment of advanced bladder cancer in the United States in May 2017.
Calquence, which was launched in the United States in October last year, generated sales of $12 million in the second quarter compared with $8 million in the previous quarter.
Regional Performance
In the United States, product sales were up 6% to $1.62 billion as higher sales of newer products were partially offset by lower Symbicort sales. However, European markets witnessed a 17% decline in sales to $1.03 billion due to weak Crestor sales. Revenues from Emerging Markets were up 12% to $1.66 billion, primarily on the back of strong growth in China (up 26% to $868 million) while sales remained flat in ex-China markets amid challenging conditions in the healthcare market in Russia, the Middle East and Africa. In Established ROW market (comprising Japan, Canada and other markets), sales declined 15% to $723 million.
Profit Discussion
AstraZeneca’s core gross margin declined 100 basis points (bps) to 81.3%. Core selling, general and administrative (SG&A) expenses rose 8% to $2.13 billion due to investment in product launches.
In the quarter, core research and development (R&D) expenses rose 1% to $1.32 billion. Operating margin declined 610 bps to 24.5% in the quarter.
2018 Outlook
AstraZeneca maintained its previously issued earnings and sales outlook.
AstraZeneca expects core EPS for 2018 in the range of $1.65 to $1.75 per ADR. The company expects product sales to grow in low single digit percentage. However, product sales growth is expected to improve in the second half of the year.
AstraZeneca is hopeful that the effects of the Crestor patent expiration in Europe and Japan will recede materially in the second half
Management guided that total externalization revenues and other income in 2018 will be less than 2017.
Currency movements are expected to favorably impact product sales and core earnings per share by a low single-digit percentage.
While adjusted R&D costs are expected to be in line or decline in a low single-digit percentage range from 2017 levels, the company anticipates SG&A costs to increase by a low to mid-single digit percentage to support product launches like Fasenra and Imfinzi.
The company expects restructuring costs and capital expenditure to decline through the rest of the year.
Adjusted tax rate is expected to be in the range of 16%-20% compared with 14% for 2017.
AstraZeneca PLC Price, Consensus and EPS Surprise
AstraZeneca PLC Price, Consensus and EPS Surprise | AstraZeneca PLC Quote
Zacks Rank & Stocks to Consider
AstraZeneca currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked pharma/biotech stocks include Gilead Sciences, Inc. (GILD - Free Report) and Eli Lilly (LLY - Free Report) . While Gilead has a Zacks Rank #1, Lilly is a #2 Ranked (Buy) stock.
Gilead’s earnings estimates have risen from $6.09 to $6.15 for 2018 and from $6.31 to $6.33 for 2019 over the past 60 days. The stock has gained 10.2% this year so far.
Lilly’s earnings estimates have increased from $5.15 to $5.20 for 2018 and from $5.46 to $5.55 for 2019 over the past 60 days. The stock has gained 14.2% this year so far.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>