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AstraZeneca returns to sales growth

A glimmer of good financial news, but the pipeline remains key to future performance
February 2, 2018

For the first time since 2014, AstraZeneca (AZN) has reported an increase in drugs sales. Fourth quarter revenue rose 3 per cent at constant currencies to $5.5bn, while annual product sales declined by just 5 per cent – significantly better than the 12 per cent downturn reported in the first quarter. It is not the grand leap back to growth that investors may have hoped for, but the pharma giant does appear to be turning a corner – finally.

IC TIP: Buy at 4813p

Driving that change in momentum were Symbicort and Pulmicort, the group’s two newest inhalers, which lifted respiratory revenue 8 per cent in the final quarter. That’s perhaps surprising for a company which has set its sights on cracking the oncology market, but following the high-profile failure of its novel combination lung cancer treatment last summer, management seem happy to take what they can.

Imfinzi – one of the two cancer drugs tested in the failed combination trial – will be launched in the next few months, which supports analyst confidence that oncology will make a more meaningful contribution to sales in 2018. The group has guided to a low single-digit percentage increase in product revenue, but with the launch of new drugs due to widen costs, earnings are expected to fall somewhere between $3.30 and $3.50. Broker JP Morgan expects consensus forecasts earnings of 342ȼ in the year to December 2018, flat on last year's numbers. 

ASTRAZENECA (AZN)   
ORD PRICE:4,813pMARKET VALUE:£ 60.9bn
TOUCH:4,811-4,813p12-MONTH HIGH / LOW:5,520p4,150p
DIVIDEND YIELD:3.0%PE RATIO:29
NET ASSET VALUE:1181ȼ*NET DEBT76%
Year to 31 DecTurnover ($bn)Pre-tax profit ($bn)Earnings per share (ȼ)Dividend per share (p)**
201325.73.30204176
201426.11.2098178
201524.73.10223189
201623.03.55277219
201722.52.23237203
% change-2-37-14-7
Ex-div:15 Feb   
Payment:19 Mar   
*Includes intangible assets of $37.4bn, or 2,959ȼ a share.   £1=$1.42. **Declared in US$ and maintained at 280ȼ since 2016