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AstraZeneca's (AZN) Q4 Earnings and Sales Miss Estimates

Zacks Equity Research

AstraZeneca AZN reported dismal fourth-quarter results with earnings and sales both missing the Zacks Consensus Estimate. The company issued revenue and earnings guidance for 2020. It expects coronavirus outbreak in China to unfavorably impact its sales and profits in 2020.

Shares of AstraZeneca were down almost 1.8% in pre-market trading on Feb 14 following the dismal fourth quarter results. However, the company’s shares have rallied 20.5% in the past year compared with the industry’s increase of 9.2%

Earnings & Sales Miss

Fourth-quarter 2019 core earnings of 45 cents per American depositary share missed the Zacks Consensus Estimate of 53 cents. Core earnings per share of 89 cents declined 46% year over year at constant exchange rates (“CER”).

Total revenues were up 4% (5% at CER) to $6.66 billion in the reported quarter, driven by higher product sales. Revenues, however, missed the Zacks Consensus Estimate of $6.71 billion.

All growth rates mentioned below are on a year-over-year basis and at CER.

Product Sales Rise

Product sales rose 9% at CER to $6.25 billion. Higher sales of newer medicines and higher sales in emerging markets offset lower sales of many other legacy medicines.

Collaboration revenues (formerly Externalization revenues) were $414 million, down 36% year over year.

Among AstraZeneca’s various therapeutic areas, Oncology was up 29%, New Cardiovascular, Renal and Metabolism was up 7%, BioPharmaceuticals was up 11%, and Respiratory rose 14%. However, other medicines declined 16%.

Newer Products Drive Sales

Among the newer medicines, Lynparza sales rose 69% year over year and 7.3% sequentially to $351 million in the quarter on the back of expanded use in ovarian and breast cancer, as well as solid growth in emerging markets. AstraZeneca markets Lynparza in partnership with Merck MRK.

Tagrisso recorded sales of $884 million, up 49% year over year driven by continued underlying demand growth and strong uptake in the first-line setting for lung cancer as it is the standard of care. Sales increased 2% sequentially in the U.S. market.

Imfinzi generated sales of $424 million in the quarter, up 62% year over year mainly driven by strong demand in lung cancer patients. Like the previous quarters, the vast majority of Imfinzi’s sales came from the United States and the lung cancer indication.

Calquence, which was launched in the United States in October 2017, generated sales of $56 million in the fourth quarter compared with $44 million in the previous quarter.

Brilinta/Brilique sales were $428 million in the reported quarter, up 15% year over year driven by continued patient uptake in acute coronary syndrome and high-risk post-myocardial infarction indications.

Farxiga recorded sales of $419 million in the quarter, up 7% year over year.

Asthma medicine Fasenra recorded sales of $206 million in the quarter, up 65% year over year. AstraZeneca said Fasenra enjoys leadership position among novel biologic asthma medicines in top five European countries and Japan.

Bevespi, a LAMA/LABA in a pressurized metered dose inhaler, recorded sales of $12 million in the quarter, compared to $10 million recorded in the previous quarter, amid slower-than-anticipated growth in LAMA/LABA class.

Among other medicines, Bydureon sales were up 1% to $139 million. Seloken sales increased 20% to $190 million. However, Iressa sales were down 28% to $80 million. Onglyza sales declined 10% to $131 million and Byetta sales were down 15% to $27 million.

Older Products

Crestor sales declined 15% to $296 million. U.S. and Europe sales were weak as multiple generic versions of the drug entered the market.

Symbicort sales were up 13% in the quarter to $712 million while Pulmicort sales rose 7% to $413 million.

Nexium recorded sales of $353 million, down 10% due to lower sales in the United States. Sales of other legacy drugs including Zoladex, Arimidex, Atacand and Daliresp/Daxas grew in the quarter while sales of others like Faslodex, Casodex, and Synagis declined.

Regional Performance

In the United States, product sales were up 1% to $2.1 billion. Sales in European markets grew 4% in the fourth quarter to $1.18 billion. Revenues from Emerging Markets were up 20% to $2.1 billion, primarily on the back of strong growth in China (up 28% to $1.19 billion).

In Established ROW market (comprising Japan, Canada and other markets), sales were up 13% to $918 million.

Profit Discussion

AstraZeneca’s core gross margin declined two percentage points (at CER) to 77.5%. Core selling, general and administrative (SG&A) expenses rose 9% to $2.63 billion.

In the quarter, core research and development (R&D) expenses rose 4% to $1.5 billion. Core operating profit declined 33% to $1.55 billion in the quarter. Core operating margin decreased 12 percentage points to 23.2% in the quarter.

2020 View

AstraZeneca issued its guidance for total revenues and core EPS for 2020. The company expects total revenues to grow by a high single digit to a low double digit. The company expects core EPS guidance to increase by a mid- to high-teens percentage.

The company stated that the guidance takes into account the unfavorable impact of the recent coronavirus outbreak and expects it to last for a few months. It plans to provide an updated guidance on its first-quarter 2020 earnings call, after gaining an insight on the actual impact of the coronavirus outbreak.

AstraZeneca PLC Price, Consensus and EPS Surprise

 

AstraZeneca PLC Price, Consensus and EPS Surprise

AstraZeneca PLC price-consensus-eps-surprise-chart | AstraZeneca PLC Quote

Zacks Rank & Stocks to Consider

AstraZeneca currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks worth considering in the pharma/biotech sector include Novartis AG NVS and Vertex Pharmaceuticals Incorporated VRTX, both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (strong Buy) stocks here.

Novartis’ earnings estimates have moved 0.4% north for 2020 over the past 60 days. The stock has rallied 10.6% in the past year.

Vertex’s earnings estimates have been revised 13.5% upward for 2020 over the past 60 days. The stock has jumped 33.7% in the past year.

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