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AstraZeneca posts first rise in annual product sales for almost ten years

Patent expiries on key blockbusters such as Crestor and Seroquel have put a huge dent in sales over the past decade or so, but Astra returned to growth in 2018
mammary scan
Sales of Tagrisso and Lynparza, two of Astra’s new cancer drugs, more than doubled last year

For the first time in almost a decade, AstraZeneca PLC (LON:AZN) has posted a rise in annual product sales.

The FTSE 100-pharma giant has seen billions wiped from its top line in recent years as some of its blockbuster drugs – such as the statin, Crestor, and schizophrenia treatment, Seroquel – have lost their exclusivity.

READ: Astra confirms full-year guidance; CEO says Q3 results mark an important milestone

But it has reinvented its pipeline of late, and a wave of new drugs, including much-hyped cancer treatments Tagrisso and Lynparza, helped product sales to rise 4% to US$21.0bn in 2018 – in line with its guidance for a low single-digit percentage increase.

Total revenue fell 2% to US$22.1bn, reflecting a sharp drop off in externalisation revenues, which includes disposals and licensing deals, something the company has been doing a lot of recently in order to offset slumping product sales.

Reported operating profit fell 8% to £3.39bn in the 12 months ended 31 December as a restructuring charge and “manufacturing variances” knocked margins slightly.

Astra set for period of ‘sustained growth’

AstraZeneca is guiding for a “high single-digit percentage increase” in product sales for 2019 while operating profits should rise by a “mid-teens percentage”.

Chief executive Pascal Soriot, who is targeting annual revenue of US$40bn by 2023, is confident his firm is entering “a period of sustained growth”.

“Closing the year with another strong quarter, our performance confirmed that AstraZeneca has returned to growth,” said Soriot, who has been at the helm for almost seven years.

“Our new medicines performed particularly well across the therapy areas and the Emerging Markets business went from strength to strength. The performance of our new medicines demonstrated the ability of our commercial teams to convert the pipeline into successful medicines.”

He added: “2019 will be a year of focus on continued pipeline delivery and flawless commercial execution.”

City seems happy

“Despite the somewhat messy Q4 numbers, guidance for 2019 is likely to be well received with product sales growth of high single-digit expected – in-line with consensus at 7%,” said Liberum analysts in a note to clients.

“But some margin expansion should allow for Core EBIT growth at mid-teens to deliver a Core EPS range of US$3.50-3.70 at constant currency or US$3.43-3.63 in reported terms at current exchange rates.

“Consensus is at the bottom end of this range at US$3.46 implying room for upgrades.”

In early afternoon trading, AstraZeneca shares in London were 4.9% higher at 6,002p.

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