New drugs drive optimism at AstraZeneca

Fortunately for Astra’s shareholders, reported numbers don’t really matter. The company’s value lies in future sales, which will be generated from its newest drugs – and these are performing remarkably well. Revenue generated from new medicines in the first half rose 69 per cent at constant currencies, thanks largely to a strong performance from cancer drugs Lynparza, Tagrisso and Imfinzi.  

Tagrisso, in particular, surpassed expectations as it benefited from its recent approval as the first-choice treatment for lung cancer patients in Europe. This shows the importance of Astra's large research and development programme, which aims to extract the greatest possible value from each individual drug. And this is an area in which Astra excels – the group gained four regulatory approvals in the reported period, three of which were label extensions for drugs that are currently on the market.

Investors remain resoundingly optimistic. The shares rose 4 per cent on results day, despite the 39 per cent drop in core earnings in the first half and the fact that annual EPS is forecast to drop to 339ȼ (from 403ȼ in 2017), according to consensus broker forecasts. That said, management remains confident that new drug sales in the second half will drive overall growth in the business and eventually lead to the first like-for-like EPS growth since 2014.