AstraZeneca: Trust me (on guidance), I’m a doctor

AstraZeneca may not be the FTSE’s heaviest faller this morning (that prize goes to JMAT). However, by virtue of its heavyweight status (2.9% weighting), it is inflicting the most damage, taking almost 6pts off the index.

AstraZeneca: Trust me (on guidance), I’m a doctor

AstraZeneca: Trust me (on guidance), I’m a doctor

AstraZeneca may not be the FTSE’s heaviest faller this morning (that prize goes to JMAT). However, by virtue of its heavyweight status (2.9% weighting), it is inflicting the most damage, taking almost 6pts off the index. This comes after Q1 results missed consensus expectations; revenues by a shade, profits by rather more, as product sales remained under pressure and costs rose.

Revenues -4% to $5.18bn (-9% at constant FX), despite product Sales +3% to $5bn (-2% at constant FX), was just below $5.2bn consensus. However, it highlights; 1) a flattering 5% FX tailwind, and; 2) a significant plunge (-66%) in “externalisation revenues” which include proceeds from licensing & partnership deals (royalties, milestones) booked as sales.

The generic erosion of sales of its blockbuster ($1bn sales per year) statin Crestor was also greater than expected (-38%) hurting the CVRM franchise (-8%), Respiratory sales were flat, although this was offset to some extent by strong Oncology (+39%), sales in China (+31%) and Emerging Markets +13% we well as new treatment launches across multiple therapies.

The real disappointment, however, comes from a 9% miss for Core Earnings ($0.48 per share versus $0.57 expectations), down circa 50% on Q1 last year. FX moves also increased most of the cost base (COGS, Distribution, SG&A), fuelled by new launches, but this easily overpowered efficiency savings in R&D to hammer margins down through the P&L.

Even if management says trading is in-line and left full-year sales and profits guidance unchanged, investors are skeptical enough about whether sales growth can recover over the course of the year (“H2 weighted”) to send the shares 2-3% lower. There’s a lot riding on recent launches to get product sales back to growth. Q2 and Q3 could thus make or break.

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Categories: Analysis, News, Shares
Tags: AstraZeneca

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