Shares in biopharmaceutical firm AstraZeneca (AZN) dropped 5% to £90.22 on Friday after its third quarter earnings fell short of expectations, driven by higher than anticipated operating and research costs.
Continued heavy investment in several late stage cancer drug trials and the advancement of early stage clinical trials in biopharmaceuticals pushed core research and development costs up 34% year-to-date to $5.59 billion.
Meanwhile core SG&A (selling, general and administrative) expenses ballooned 19% higher to $7.73 billion as the company launched several new medicines.
The higher costs resulted in core operating margins falling to 26% from 28% a year ago. The reported operating margin dropped to 5.3% driven by an impairment charge to intangible assets.
Chief executive Pascal Soriot said: ‘AstraZeneca’s scientific leadership continues to provide strong revenue growth and exceptional pipeline delivery, with eight positive late-stage readouts across seven medicines since June, including our long acting antibody combination showing promise in both prevention and treatment of Covid-19.’
STRONG REVENUE PERFORMANCE
Revenues grew strongly in the quarter up 50% to $9.87 billion which included $1.1 billion of Covid-19 vaccine sales. Excluding vaccine sales, revenues were up 32% in constant currencies which took year-to-date revenues up 17% to $23.19 billion.
Contributions were strong across all franchises with the cancer segment up 19% to $9.74 billion, cardiovascular, renal and metabolism up 14% to $6.03 billion and respiratory and immunology up 16% to $4.46 billion.
COVID-19 VACCIINE MOVING INTO PROFIT
Despite higher costs, the company reiterated prior expectations for core full year earnings per share to be between $5.05-and-$5.40 with revenues growing in the low-twenties percentage range.
Including revenues from Covid-19 vaccine, growth is expected to be in the mid-to-high-twenties percentage. The company expects to ‘transition the vaccine’ to modest profitability as new orders are received.
