Full year profits from pharmaceutical company AstraZeneca (AZN) just missed analyst estimates today, while the company’s guidance regarding the effect of the coronavirus on current-year trading seemed contradictory.

Investors seemed confused by the news, initially sending the shares down 5% to £72 before bidding them back up to £76.60. By lunchtime they had settled down 0.5% to £75.93.

BACK TO GROWTH

The company returned to growth in 2019 with full-year product revenues up 15% to $23.6bn in constant currencies driven by emerging market demand and new medicines.

There was some disappointment that fourth quarter product sales, up 9% to $6.25bn, were slightly shy of analysts’ expectations of $6.3bn.

Chief executive Pascal Soriol commented, ‘we are becoming a better-balanced business, both regionally and through our medicines. This transition is a further step towards improving operating leverage and cash generation.’

ONCOLOGY AND NEW MEDICINES

Strong oncology (cancer treatment) growth continued with revenues up 44% to $8.7bn, led by emerging markets sales which were up 52% to $2.2bn.

The company’s lung cancer drug Tagrisso saw sales increase 74%, slower than the third quarter due to supply issues in the US but impressive nonetheless. Sales of bladder cancer drug Imfinzi increased to $1.5bn while breast cancer drug Lynparza registered an 89% increase in sales  to $1.2bn.

Recent approvals of cancer drugs Calquence and Enhertu are expected to contribute to 2020 sales momentum.

GUIDANCE CHANGED

Management made a couple of changes to their forward guidance, which may have unsettled investors. Expected revenue growth of high single to low double-digits now includes income from collaborations with third-party firms.

At the same time ‘all guidance assumes an unfavorable impact from China lasting up to a few months as a result of the recent novel coronavirus (Covid-19) outbreak.’

However, during the conference call with analysts, management downplayed the virus's impact saying that it had not yet seen any evidence of disruption to clinical trials in China.

In contrast, core earnings per share (EPS) are expected to grow in the high teens and the company flagged that it is focusing on improving operational leverage. In other words, in future a higher proportion of revenue growth should feed through to profits.

The board reaffirmed its progressive dividend policy announcing an interim payment of $1.9, taking the full-year payment to $2.8 per share.

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Issue Date: 14 Feb 2020