AstraZeneca (AZN) could be turning a corner after third-quarter numbers revealed a return to sales growth, following strong demand for the group’s cancer products. Total revenues of $5.3bn (£4.04bn) exceeded consensus expectations by 1.2 per cent after product sales of $5.3bn beat consensus estimates by a further 8 per cent. Albeit down nearly a third year on year, core operating profits of $1.4bn also exceeded expectations thanks to higher operating income and lower research and development (R&D) costs.
For the remainder of the year, sales and general administrative costs are likely to increase to support the new product launches, while R&D costs may fall at a slightly faster rate than expected. But the group also reiterated full-year guidance for earnings per share (EPS) of $3.30 to $3.50, with consensus estimates sitting bang in the middle at $3.31.
The news was met with a positive response in the group’s share price, which closed trading 4 per cent higher, having found renewed momentum over the past 12 months. Earlier in the week, AstraZeneca had announced plans to sell the rights to three respiratory drugs to Swiss pharmaceutical group Covis Pharma, in a deal worth $350m (£268m). Alvesco and Omnaris were only bought three years ago, as part of the pharma giant’s $575m acquisition of Japanese group Takeda’s respiratory portfolio. They will now be sold on – along with nasal medicine Zetonna – as the group continues to divest what it deems to be “non-core” medicines, and reinvest the proceeds in new drug development. While the $350m will be due to AstraZeneca on the deal’s close, Covis could pay an additional $21m over the next four years, depending how well the drugs sell. The sold rights cover ex-US markets and US royalties.
All of this fits well with what Astra has long promised its investors: that innovative new drugs will fuel future growth as lesser-earning medicines are phased out. True, the loss of exclusivity on its ‘blockbuster’ cholesterol drug Crestor – as well as other ‘legacy’ products – still dragged down cardiovascular, renal and metabolism (CVRM) sales, but the third-quarter sales performance could easily lay the foundation for a brighter future.
