# AstraZeneca’s scientific leadership continues to provide strong revenue growth and exceptional pipeline delivery

- Link: https://www.directorstalkinterviews.com/astrazenecas-scientific-leadership-continues-to-provide-strong-revenue-growth-and-exceptional-pipeline-delivery/4121032904
- Published: 2021-11-12T07:19:47+00:00
- Author: Amilia Stone

**[AstraZeneca PLC](https://www.directorstalkinterviews.com/ftse-company/astrazeneca/azn.l)**(
[LON:AZN](https://www.directorstalkinterviews.com/ftse-company/astrazeneca/azn.l))
has announced its year to date and Q3 2021 results.

–    Total Revenue in the year to date, including Alexion from 21 July 2021, was
$25,406m, representing growth of 32% (28% at CER). Total Revenue in the third quarter
increased by 50% (48% at CER) to $9,866m

–    Excluding the pandemic COVID-19 vaccine, Total Revenue increased 21% (17% at
CER) in the year to date to $23,187m, and by 34% (32% at CER) in the quarter to 
$8,816m

–    Eight positive Phase III results since June, with potential to change standard
of care in several diseases

–    Alexion integration progressing well, creating new opportunities in rare diseases

–    Operating Expenses in the quarter reflected the addition of Alexion, as well
increased R&D expenses across multiple programs, investment in our COVID-19 medicines,
and increased SG&A from pre-launch activities following successful pipeline delivery

–    Earnings guidance for the full year is unchanged

In the year to date, AstraZeneca delivered double-digit revenue growth from its 
Oncology, CVRM^(1) and R&I^(2) medicines, and established its Rare Disease capability
with the acquisition of Alexion Pharmaceuticals Inc. (Alexion). Rare disease is 
a high-growth area with rapid innovation and significant unmet medical need.

Since June, AstraZeneca has made significant progress with its late-stage pipeline,
reporting eight positive Phase III trial results and the approval of _Saphnelo_ (
anifrolumab) in the US for the treatment of systemic lupus erythematosus, and _Ultomiris_
in the EU for children and adolescents with paroxysmal nocturnal haemoglobinuria.
_Enhertu_ received a Breakthrough Therapy Designation from the US FDA^(3) following
ground‑breaking results from the DESTINY-Breast03 trial. The Company also announced
positive results for _Lynparza_ in prostate cancer, _Imfinzi_ plus tremelimumab 
in liver cancer, _Imfinzi_ in biliary tract cancer, PT027 in asthma, ALXN1840 in
Wilson disease, and AZD7442 in COVID-19 prophylaxis and treatment.

> **Pascal Soriot, Chief Executive Officer, commented:**
> “AstraZeneca’s scientific leadership continues to provide strong revenue growth
> and exceptional pipeline delivery, with eight positive late-stage readouts across
> seven medicines since June, including our long acting antibody combination showing
> promise in both prevention and treatment of COVID-19. The addition of Alexion 
> furthers our commitment to bring transformative therapies to patients around the
> world, and I am proud of our colleagues’ ongoing dedication and focus.
> Our broad portfolio of medicines and diversified geographic exposure provides 
> a robust platform for long-term sustainable growth. Following accelerated investment
> in upcoming launches after positive data flow, we expect a solid finish to the
> year and our earnings guidance is unchanged.”

Key elements of Total Revenue performance in the year-to-date included:

–    An increase in Product Sales of 33% (29% at CER) to $25,043m

–    The first contribution from Rare Disease, which generated $1,311m of revenue
in the period following completion of the Alexion acquisition on 21 July 2021

–    Oncology growth of 19% (16% at CER) to $9,744m, CVRM growth of 14% (10% at 
CER) to $6,028m and R&I growth of 16% (12% at CER) to $4,456m

–    An increase in Emerging Markets revenue of 33% (28% at CER) to $8,618m. In 
China, revenue increased 17% (8% CER) to $4,699m in the year to date and by 10% (
2% CER) in the quarter. China revenues in the year to date were impacted by pricing
pressure associated with NRDL^(11) and VBP^(12) programmes.

–    _Tagrisso_‘s sequential quarterly performance in China was impacted by inventory
phasing and stock compensation relating to NRDL changes in March. In future periods,
volume growth from increased patient access is expected to compensate for the lower
NRDL price

–    Revenue in ex-China Emerging Markets increased 60% in the year to date to $
3,919m. Excluding vaccine revenue of $1,139m, revenue in ex-China Emerging Markets
increased by 13% in the year to date (14% at CER) to $2,780m and by 30% in the quarter
to $1,018m, driven by Oncology medicines and _Farxiga_

–    In the US, Total Revenue increased by 29% to $8,305m and in Europe by 40% (
31% at CER) to $5,178m, including pandemic COVID-19 vaccine revenue of $736m

**Guidance**

The Company provides further details on its FY 2021 guidance at CER.

Total revenue excluding the COVID-19 vaccine is expected to grow by a low-twenties
percentage, in line with prior guidance. Including vaccine revenues in Q4 2021, 
revenue is expected to grow by a mid-to-high twenties percentage.

Growth in Core EPS^(13) to $5.05 to $5.40, in line with prior guidance.

Prior guidance excluded the revenue and profit impact of sales of the pandemic vaccine.
The Company is now expecting to progressively transition the vaccine to modest profitability
as new orders are received. COVID‑19 vaccine sales in Q4 2021 are expected to be
a blend of the original pandemic agreements and new orders, with the large majority
coming from pandemic agreements. The limited profit contribution from the vaccine
in Q4 2021 is expected to offset costs relating to the Company’s long acting antibody
combination (AZD7442), resulting in no change to Core EPS guidance. Core Tax Rate
guidance is unchanged at 18‑22%.

In general, AstraZeneca continues to recognise the heightened risks and uncertainties
from the effects of COVID-19. Variations in performance between quarters can be 
expected to continue.

The Company is unable to provide guidance on a Reported basis because AstraZeneca
cannot reliably forecast material elements of the Reported result, including any
fair value adjustments arising on acquisition-related liabilities, intangible asset
impairment charges and legal-settlement provisions. Please refer to the cautionary
statements section regarding forward-looking statements at the end of this announcement.

**Currency impact**

If foreign-exchange rates for October to December 2021 were to remain at the average
of rates seen in the year to date, it is anticipated that there would be a low single-
digit favourable impact on Total Revenue and an immaterial impact on Core EPS versus
CER data. The Company’s foreign-exchange rate sensitivity analysis is contained 
within the operating and financial review.

**Financial summary**

–    Variances across periods are based on a comparison of the Group’s performance
in the year to date and the quarter, including Alexion from 21 July 2021, with the
Group’s performance in the comparative prior periods, which do not include Alexion.
Pro forma total revenue growth rates have been presented only for Q3 2021 Rare Disease
and its constituent medicines, and do not impact any Group totals

–    Total Revenue, comprising Product Sales and Collaboration Revenue, increased
by 32% in the year to date (28% at CER) to $25,406m. Total Revenue included $2,219m
from the pandemic COVID-19 vaccine

–    Reported Gross Profit^(14) Margin in the year to date declined eleven percentage
points to 68.8%; Core Gross Profit Margin declined six percentage points in the 
year to date to 74.1%, predominantly reflecting the equitable supply, at no profit
to AstraZeneca, of the pandemic COVID-19 vaccine, together with an increasing impact
from profit-sharing arrangements (primarily _Lynparza_ and roxadustat) and the impact
of the NRDL and VBP programmes in China. These effects were partially offset by 
the contribution of Alexion from 21 July 2021, a higher proportion of Oncology sales,
and increasing patient access in China. Reported Gross Profit Margin was also impacted
by $1,044m due to the unwind of the fair value adjustment to Alexion inventories
at the date of acquisition. Variations in gross margin performance between periods
can be expected to continue

–    Reported Total Operating Expense increased in the year to date by 39% (34% 
at CER) to $17,591m. Core Total Operating Expense increased by 24% (20% at CER) 
to $13,649m and represented 54% of Total Revenue (YTD 2020: 57%)

–    Reported R&D Expense increased in the year to date by 67% (63% at CER) to $
7,152m including an impairment charge of $1,172m recognised in the quarter on an
intangible asset related to the acquisition of Ardea Biosciences, Inc. in 2012, 
following the decision to discontinue the development of verinurad. Core R&D Expense
increased in the year to date by 34% (30% at CER) to $5,591m with increases in both
Reported and Core R&D Expense reflecting the Company’s continued investment in its
COVID-19 vaccine and AZD7442, investment in several late-stage Oncology trials and
the advancement of a number of Phase II clinical development programmes in BioPharmaceuticals

–    Reported SG&A Expense increased in the year to date by 25% (21% at CER) to 
$10,117m and includes the increased amortisation of intangible assets related to
the Alexion acquisition. Core SG&A Expense increased by 19% (14% at CER) to $7,736m,
reflecting the addition of Alexion SG&A expenses from 21 July 2021, investment in
Oncology-medicine launches, the launch of several new BioPharmaceuticals medicines,
particularly in the US, AstraZeneca’s further expansion in Emerging Markets, and
the existing infrastructure base in China

–    Reported and Core Other Operating Income and Expense^(15) increased in the 
year to date by 51% (50% at CER) to $1,345m and $1,346m respectively, and included
$776m income from the divestment of AstraZeneca’s 26.7% share of Viela Bio, Inc.(
Viela) in March 2021

–    The Reported Operating Profit Margin declined fourteen percentage points (thirteen
at CER) to 5.3%, reflecting the aforementioned intangible impairments and other 
factors. The Core Operating Profit Margin declined two percentage points (one percentage
point at CER) in the year to date to 26.0% driven by the aforementioned increase
in R&D and SG&A expenses

–    Reported EPS in the year to date declined 80% (65% at CER) to $0.33. Core EPS
increased by 22% (23% at CER) to $3.59. Reported and Core EPS were adversely affected
by $0.03 due to the pandemic COVID‑19 vaccine

**Corporate and business development**

In 2019, Caelum Biosciences (Caelum) and Alexion entered into a collaboration to
develop CAEL-101 for light chain amyloidosis, whereby Alexion acquired a minority
equity interest and an exclusive option to acquire the remaining equity in Caelum.
AstraZeneca has treated Caelum as a subsidiary from the date of acquisition of Alexion,
reflecting a non-controlling interest of $150m. On 5 October 2021, the Group completed
the acquisition of the remaining shares of Caelum and paid its shareholders the 
option exercise price of $150m, with the potential for additional payments of up
to $350m upon achievement of regulatory and commercial milestones.

In November 2021, AstraZeneca agreed to transfer its global rights to _Eklira_, 
known as _Tudorza_ in the US, and _Duaklir_ to Covis Pharma Group for $270m payable
on completion, which is expected in the fourth quarter of 2021. Covis Pharma Group
will also cover certain ongoing development costs related to the medicines. The 
income arising from the upfront payment will be fully offset by a charge for derecognition
of the associated intangible asset and therefore no Other Operating Income will 
be recognised in AstraZeneca’s financial statements.

**[Sustainability](https://www.directorstalkinterviews.com/sustainability-green-stocks-news)
summary**

**a)  Access to healthcare**

In the third quarter of 2021, the Company delivered approximately 67 million doses
of its pandemic COVID-19 vaccine through COVAX^(17). As of 30 September 2021, the
Company and its sublicensee Serum Institute of India Pvt. Ltd. (SII) have delivered
more than 145 million doses with COVAX to over 125 countries, approximately half
of all COVAX supply. The majority of the doses have gone to low and middle-income
countries. Globally, AstraZeneca and its sub-licensing partners have released more
than 1.5 billion vaccine doses as of the 30 September 2021, for supply in over 170
countries.

**b)  Environmental protection**

On 3 November 2021, at the 26th UN Climate Change Conference (COP26), HRH The Prince
of Wales named AstraZeneca as one of the first holders of the Terra Carta Seal, 
in recognition of the company’s efforts to lead and accelerate action for a more
sustainable future. In addition, Pascal Soriot was recognised as the Champion of
the new Sustainable Markets Initiative (SMI) Health System Taskforce, which was 
launched at COP26 with HRH The Prince of Wales and with health systems leaders, 
with the shared ambition to accelerate the delivery of net zero, sustainable healthcare.

A more extensive sustainability update is provided later in this announcement.

**Conference call**

A conference call and webcast for investors and analysts will begin at 11:45 GMT.
Details can be accessed via [astrazeneca.com](https://www.astrazeneca.com/).

**Reporting calendar**

The Company intends to publish its full-year and fourth-quarter results on Thursday
10 February 2022.

Share on: