After an early stumble, AstraZeneca PLC (LSE:AZN) shares pulled back to level by the close on Tuesday, but analysts see reasons for investors to stay watchful despite the apparent strength of the results.
At face value, the update looked reassuring. Core earnings per share were up 21% at constant exchange rates, comfortably beating expectations by 10%.
Strong cost control and a one-off benefit from a lower tax rate supported a healthy profit margin, and full-year guidance was left unchanged.
However, UBS called the outcome “mixed”, digging beneath the surface to highlight areas of concern.
In particular, it flagged a “puzzling” lack of revenue growth in US oncology, despite strong volume gains. The explanation lies in the shifting economics of US healthcare.
As more cancer patients move onto Medicare plans, the Anglo-Swedish giant appears to be booking heavier pricing deductions tied to new rules under the US Inflation Reduction Act.
UBS suspects AstraZeneca is being more conservative in accounting for these pressures than some rivals, which could weigh on revenue visibility.
In rare diseases, sales of Soliris disappointed. The Swiss bank noted this may have been linked to destocking ahead of an expected biosimilar launch, but it also raised the risk that AstraZeneca’s Soliris and Ultomiris franchise could face rising competition sooner than hoped.
Pipeline updates offered a mixed bag. A promising paediatric study for Ultomiris in severe transplant complications produced positive early results. However, a Phase 3 study of Truqap in prostate cancer was discontinued after disappointing data.
Looking ahead, UBS sees political risks gathering pace. The potential impact of US drug price reforms and broader trade tensions could start to weigh more heavily on sentiment.
In short, while AstraZeneca’s underlying business remains strong, UBS’s analysis suggests investors should not take today’s solid profit beat at face value. Risks around pricing, competition and regulatory change are creeping higher beneath the surface.
The shares, down 4% earlier in the session, were up 0.7% at 10,598p in the final few minutes of trading.