AstraZeneca PLC (LSE:AZN) is due to report first-quarter earnings on April 29, and UBS is bracing for a modest miss against market expectations, though the bank maintains a broadly supportive stance on the UK-listed drugmaker.
Analysts at the Swiss investment bank expect group revenue and core operating profit to come in around 1% and 2% below Visible Alpha consensus, respectively, with softer-than-expected sales from diabetes drug Farxiga and rare disease treatment Soliris weighing on performance. A slightly lower gross margin is also factored in.
The update comes at a delicate time for the global pharmaceutical sector, as investors await clarity on the potential impact of Donald Trump’s sweeping tariff regime.
So far, medicines have been excluded from new US trade barriers, but recent comments from the White House suggest pharmaceuticals could be targeted in the next wave.
UBS says it does not expect AZ to provide much detail until official policy is published, but flags that the company’s dual manufacturing setup should offer some protection if tariffs are imposed.
In addition, the Anglo-Swedish drugs giant's intellectual property is often housed in lower-tax jurisdictions such as the UK, meaning the profitability of its US business may already be compressed.
Beyond the macro backdrop, the market will be watching for signs of sustained growth in key oncology and rare disease drugs.
UBS expects continued strong demand for Tagrisso, used to treat lung cancer, as well as Imfinzi and Calquence. Ultomiris is also tipped to post solid gains in rare diseases, though this is likely to be partially offset by the decline of Soliris, which is facing competition from generics.
Reforms to the US Medicare Part D drug benefit scheme could also drag on earnings. AZ is considered one of the most exposed to changes in the reimbursement landscape, due to its focus on high-cost drugs.
From this year, the company will be required to shoulder roughly 20% of sales costs through discounts, a notable increase on the previous cap of around $4,000 per patient.
UBS believes this will be partially offset by increased prescription volumes, but says the timing of rebate accruals remains difficult to predict given the reforms only came into effect this quarter.
Despite these headwinds, UBS continues to view AstraZeneca as a compelling growth story, citing strong demand for its in-market products and a pipeline that could begin to deliver results later this year.
Pivotal clinical trial readouts are expected in the second half, including new data from Enhertu and other late-stage assets like baxdrostat and anselamimab.
Investors will be hoping the update offers reassurance on near-term earnings pressures while reinforcing confidence in AstraZeneca’s longer-term growth trajectory.