AstraZeneca’s AZN second-quarter 2020 earnings and sales beat the Zacks Consensus Estimate. Moreover, sales increased year over year despite the coronavirus pandemic. The company maintained its previously issued revenue and earnings guidance for 2020.

Shares of AstraZeneca were up 2.4% in pre-market trading on Jul 30, following the better-than-expected second-quarter results. This year so far, the company’s shares have risen 13.6% compared with increase of 1.1% for the industry.

Earnings & Sales Beat

Second-quarter 2020 core earnings of 48 cents per American depositary share beat the Zacks Consensus Estimate of 44 cents. Core earnings per share of 96 cents rose 31% year over year at constant exchange rates (“CER”) due to higher revenues.

Total revenues were up 8% (11% at CER) to $6.28 billion in the reported quarter, driven by higher product sales. Revenues slightly beat the Zacks Consensus Estimate of $6.25 billion.

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

Product Sales Rise

Product sales rose 9% at CER to $6.05 billion driven by higher demand for its newer medicines and double-digit growth in asthma medicine, Symbicort’s sales.

Collaboration revenues were $227 million, compared with $43 million in first-quarter 2020.

Among AstraZeneca’s various therapeutic areas, Oncology product sales were up 28%. In BioPharmaceuticals, New CVRM product sales were up 13% while Respiratory & Immunology declined 8%. Sales of other medicines declined 2%.

In Oncology, Lynparza product revenues rose 52% year over year to $419 million on the back of expanded use in ovarian and breast cancer, especially first-line ovarian cancer.  AstraZeneca markets Lynparza in partnership with Merck MRK. In May, the drug received approval for treating HRR gene-mutated metastatic castration-resistant prostate cancer. It was also approved as first-line maintenance treatment in combination with Roche’s RHHBY Avastin (bevacizumab) for HRD-positive advanced ovarian cancer in the same month.

Tagrisso sales crossed the billion-dollar mark for the first time in any single quarter. The drug recorded sales of $1.03 billion, up 35% year over year driven by continued demand growth in the second-line setting, especially in China, and strong uptake in the first-line setting.

Imfinzi generated sales of $492 million in the quarter, up 48% year over year mainly driven by strong demand in advanced lung cancer patients.

Calquence generated sales of $107 million in the quarter compared with $88 million in the previous quarter which was majorly driven by the CLL indication, launched toward the end of last year.

Iressa sales were down 38% to $70 million. Sales of older cancer drugs, Faslodex and Casodex declined while Zoladex increased. Arimidex sales were flat.

In CVRM, Brilinta/Brilique sales were $437 million in the reported quarter, up 16% year over year driven by continued patient uptake in acute coronary syndrome and high-risk post-myocardial infarction indications.

Farxiga recorded product sales of $443 million in the quarter, up 23% year over year as strong growth in China and Europe was partially offset by weaker sales in the United States.

Crestor sales declined 6% to $282 million.

Bydureon sales declined 17% to $116 million. Onglyza sales rose 3% to $115 million. Seloken sales increased 38% to $218 million. Atacand sales were up 14% to $59 million. However, Byetta sales were down 41% to $15 million.

In Respiratory & Immunology, Symbicort sales were up 15% in the quarter to $653 million due to the launch of an authorized generic version of the LABA/LAMA inhaler by AstraZeneca’s partner Prasco in the United States. U.S. sales grew 46% in the quarter. Emerging Markets sales increased 16% in the quarter driven by strong performances in China and the Middle East & Africa. In Europe, sales increased 4%.

Pulmicort sales declined 69% to $97 million reflecting the continued adverse impact of COVID-19 on the medicine’s sales in China during the quarter.

Fasenra recorded sales of $227 million in the quarter, up 37% year over year driven by higher sales in the United States, Japan and Europe.

Bevespi, a LAMA/LABA in a pressurized metered dose inhaler, recorded sales of $10 million in the quarter, lower than $12 million recorded in the previous quarter, amid slower-than-anticipated growth in LAMA/LABA class.

Breztri, which was approved in Japan in June 2019, recorded sales of $7 million in the quarter. Daliresp/Daxas declined 7% to $53 million in the quarter.

In Other Medicines, Nexium sales declined 1% to $377 million. Synagis fell 5% to $90 million.

Regional Performance

In the United States, product sales were up 10% to $2.09 billion. Sales in European markets grew 15% in the quarter to $1.24 billion. Revenues from Emerging Markets were up 13% to $2.06 billion. In Emerging Markets, sales in China rose 12% to $1.24 billion, while in ex-China markets, sales rose 15% to $813 million. In Established ROW market (comprising Japan, Canada and other markets), sales were up 3% to $890 million.

Profit Discussion

AstraZeneca’s core gross margin increased one percentage point (at CER) to 84.3%. Core selling, general and administrative (SG&A) expenses rose 3% to $2.18 billion.

Core research and development (R&D) expenses rose 9% to $1.38 billion. Core operating profit rose 31% to $1.79 billion in the quarter. Core operating margin rose four percentage points to 28.6% in the quarter.

Coronavirus Related Research Efforts

AstraZeneca has become one of the leading players in the field of coronavirus vaccine development. The company is developing its coronavirus vaccine candidate, AZD1222 in collaboration with Oxford University in a phase III study. Late-stage studies are ongoing in the UK, Brazil and South Africa and are due to start in the United States soon. Data from a phase I/II study announced last week, showed that patients vaccinated with the candidate generated strong antibody and T-cell responses in the majority of patients. Moreover, the company has signed supply deals with several countries under which it has committed to supply 2 billion doses of the vaccine, if it is successfully developed. Other leading players include Moderna MRNA and Pfizer.

Apart from the vaccine, the company is also evaluating Calquence and Farxiga in combination with current standard of care in phase II studies for treating severe COVID-19 patients who requires hospitalization. Enrollment is ongoing in these studies.

Moreover, AstraZeneca has identified a novel SARS-CoV-2-neutralising monoclonal antibody, AZD7442. The company is planning to initiate a phase I/II study soon to evaluate it as potential treatment for COVID-19.

2020 View Maintained

AstraZeneca retained its guidance for total revenues and core EPS for 2020. The company expects total revenues to grow in a high single-digit to a low double-digit range. The company expects core EPS guidance to increase in a mid- to high-teens percentage. Currency changes are expected to have a low single-digit adverse impact on sales and core EPS in 2020.

However, AstraZeneca stated that the uncertainty from the impact of COVID-19 remain and performance between quarters may vary.
 

Zacks Rank

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

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