AstraZeneca at 'inflection point' in turnaround, predicts CEO
- AstraZeneca is on track to deliver the first full year of product sales growth since 2014, as growing revenues from medicines like cancer drug Tagrisso buoy the British drugmaker.
- Through the first nine months of 2018, product sales increased by 2% in constant currencies to total $15.2 billion. Strong performance in the third quarter, during which sales rose 9%, offset weaker sales in the period from January to June.
- AstraZeneca CEO Pascal Soriot, speaking on an earnings call Thursday, described the third quarter as an "inflection point" for the company, which has been battered in recent years by the impact of expiring patents to blockbuster brands like the cholesterol drug Crestor.
Despite AstraZenca's optimism, its turnaround remains a work in progress.
Product sales are expected to grow by low single digits for the year. Overall revenues, though, slid by 8% through the first nine months of the year versus the same period in 2017. The drop largely stems from lower revenues earned through deals selling off or out-licensing rights to older brands AstraZeneca no longer plans to focus on.
Still, AstraZeneca's reliance on externalization revenue to drive its top-line points to the progress that still needs to be made in expanding sales of newer medicines.
Operating profits also markedly declined by 20%, weighed down by slightly lower gross margins as well as higher distribution and selling costs.
CEO Pascal Soriot, though, projected confidence that AstraZeneca's business is set for years of future growth.
Key to that outlook are a slate of newer drugs that the pharma believes can become multi-billion dollar products. Three are already blockbusters and growing strongly: lung cancer drug Tagrisso (osimertinib), diabetes therapy Farxiga (dapagliflozin) and the heart medicine Brilinta (ticagrelor).
Key drugs driving AstraZeneca's prospects for growth
|Q3 sales (m)||YTD sales (m)||% of YTD total sales|
SOURCE: Company presentation
Tagrisso in particular has become a star for AstraZeneca, carving out a leading position in EGFR-mutaed metastatic lung cancer. A first-line approval in April has accelerated sales growth, as has a 2017 launch in China.
China overall has become increasingly important to AstraZeneca, which is among the leading pharma companies seeking to capitalize on the Asian country's booming market for medicines.
Sales in China grew 32% year over year to reach $954 million in the third quarter, putting AstraZeneca close to a $1 billion-a-quarter pace.
Growth story notwithstanding, AstraZeneca remains a long ways off from reaching the goal of $45 billion in annual sales laid out by Soriot while fending off a takeover big by Pfizer in 2014. (Currency adjusted, that sum is now closer to $40 billion or $41 billion.)
Asked about the chances of meeting that expectation Thursday, Soriot expressed his continued belief in AstraZeneca's growth.
"The plan as we have developed it today still takes us to that kind of level," said Soriot on Thursday. "I see no reason at this point to change that."
At AstraZeneca's current pace — plus an expected bump in externalization revenue during the fourth quarter — the pharma stands to bring in close to $23 billion in 2018. Getting to $40 billion in five years will take some doing.
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