AstraZeneca lifts product sales guidance after solid first half

AstraZeneca reported first-half product sales growth of 12%, or 17% at constant exchange rates, to $11.18bn (£8.96bn) in its interim results on Thursday, including an acceleration in second-quarter product sales to $5.72bn, which was ahead 14% year-on-year, or 19% at constant currency.

The FTSE 100 pharmaceuticals giant said the second quarter saw every sales region and all three therapy areas deliver an “encouraging” performance.

That included a sustained performance from its new medicines, which was ahead 66%, or 72% at constant exchange rates, to $2.4bn.

Sales growth by therapy area saw oncology rise 51% to $2.17bn, new cardiovascular, renal and metabolism by 9% to $1.06bn, and respiratory by 2% to $1.25bn.

AstraZeneca said sales growth by region in the quarter saw total emerging markets sales growing by 17%, or 27% at constant exchange rates, to $1.95bn, with China sales growth of 34% to $1.17bn, ahead of recent trends.

US sales improved by 16% to $1.88bn, while Europe sales returned to growth, increasing by 1%, or 8% at constant exchange rates, to $1.05bn, and Japan sales rising 30% to $672m.

The board said those results were accompanied by further positive pipeline developments, with the second half of the year anticipated to be an “exceptionally busy” period for the pipeline.

Looking at the books, total revenue was up 9% for the six months ended 30 June to $11.31bn, or ahead 14% at constant exchange rates.

Reported operating profit was also 9% higher, or 12% at constant currency, to $1.59bn, while core operating profit leapt 39%, or 44% at constant exchange rates, to $3.01bn.

Its reported earnings per share managed gains of 3% to 56 US cents, with core earnings per share 38% higher, or 40% at constant exchange rates, to $1.62.

The company’s reported gross margin increased by two percentage points in the half to 80%, which AstraZeneca said partly reflected the mix of product sales and manufacturing efficiencies; with the core gross margin increasing by one percentage point to 81%.

Reported operating expenses increased by 5% in the half, or 10% at constant exchange rates, to $8,238m, which represented 73% of total revenue, down from 76% year-on-year.

Core operating expenses were 1% higher, or 5% at constant currency, to $6.92bn, which and represented 61% of total revenue - down from 67% - which the board said demonstrated operating leverage.

Reported research and development expenses declined by 1%, but increased by 3% at constant exchange rates, to $2.62bn, while core research and development expenses fell by 2%, or increased by 2% at constant currency to $2.51bn.

AstraZeneca’s reported sales, general and administrative expenses rose 9%, or 14% at constant currency, to $5.46bn.

Core sales, general and administrative expenses were ahead 3%, or 7% at constant exchange rates, to $4.26bn, which the company said primarily reflected its growth in China, as well as ongoing additional support for new medicines.

Reported other operating income and expense declined by 35% in the half, or 34% at constant currency, to $706m.

Core other operating income and expense increased 1%, or 2% at constant exchange rates, to $708m, while in the second quarter, core other operating income and expense declined by 80% to $114m.

The firm’s reported operating margin was stable in the half at 14%, while its core operating margin increased by six percentage points - five at constant exchange rates - to 27%.

AstraZeneca’s reported tax rate was 25%, up from 19% year-on-year, with its core tax rate rising to 21% from 19%.

The board said the tax rates in the half reflected the geographical mix of profits, and the impact of collaboration and divestment activity.

It declared an unchanged first interim dividend of 90 US cents per share.

Looking ahead, AstraZeneca said that based on its performance in the first half and the return to product sales growth in the second half of 2018, product sales in the 2019 financial year were now expected to increase by a low double-digit percentage.

Its prior guidance was for a high single-digit percentage increase.

“The momentum generated last year continued into the first half, consolidating AstraZeneca's return to growth based on the strength of our new medicines,” said AstraZeneca’s chief executive officer Pascal Soriot.

“Five of these new medicines are anticipated to be blockbusters this year, supporting sales across both oncology and biopharmaceuticals.

“Emerging markets, the US and Japan all grew strongly, and we delivered an encouraging turnaround in Europe in the second quarter.”

Soriot said selective investment in sustainable growth also continued, particularly in emerging markets and in its launch programmes.

Additional regulatory approvals for ‘Lynparza’ in ovarian cancer in the European Union and Japan, together with approvals for Breztri and Bevespi in COPD in Japan, illustrated further progress from the company’s pipeline, he added.

“Accompanying earnings growth this year, we are pleased to upgrade our product sales guidance and we are committed to working on our operating leverage and driving cash generation over the long term.”