- AstraZeneca on Friday posted its third consecutive quarter of sales growth, reporting earnings which benefited from strong performance by the British pharma's cancer drugs as well as quickening sales in China.
- The 14% year-over-year uptick in sales during the first three months of 2019 helps support AstraZeneca's forecast of high single digit percentage growth this year. Such a rosy outlook contrasts with the drugmaker's recent history, which until last year comprised several years of declining sales.
- Despite the turnaround, AstraZeneca's finances remain constrained enough that the company was forced to fund a recent cancer drug deal with Daiichi Sankyo via a $3.5 billion equity raise. AstraZeneca executives on Friday defended the decision, which appeared to spur a 6% drop in the company's share price following announcement of the agreement.
Years after defending AstraZeneca from a Pfizer takeover bid, CEO Pascal Soriot has finally delivered the return to growth he promised in staving off what would have been a $120 billion buyout.
Sales last year rose by 4% — the first annual increase since 2014 — and the pharma expects that figure to rise even higher this year.
Results from the first three months of the year so far support that hope, and showcase the success AstraZeneca has had in rebuilding a business in oncology.
Together, the company's cancer drugs Tagrisso (osimertinib), Imfinzi (durvalumab) and Lynparza (olaparib) earned $700 million in additional sales over last year's first quarter numbers.
While Imfinzi has hit several setbacks, Tagrisso and Lynparza are leading medicines in their respective drug classes.
All told, cancer drug sales rose 59% year over year to total nearly $1.9 billion for the quarter.
Yet while Tagrisso now ranks as AstraZeneca's top-seller, financial results did show a sequential sales decline in the U.S. — a drop company executives attributed to inventory reductions and gross-to-net price adjustments.
Prescriptions grew by mid-single digits, however, reflecting a 60% adoption among previously untreated lung cancer patients with EGFR mutations, the genetic alteration Tagrisso targets.
"We look at demand as a primary measure of the health of the brand," said David Fredrickson, AstraZeneca's head of oncology, on a Friday earnings call.
In China, meanwhile, AstraZeneca leads its pharma peers in carving out a spot in the world's second largest pharmaceutical market.
The country now accounts for nearly a quarter of the company's total sales, a share not that far off from the 33% mark the U.S. represents.
Even with encouraging sales growth, however, analysts raised questions about the ability of AstraZeneca's business to generate the cash flow needed to support its valuation and dividend.
The company reported a net cash outflow from operating activities of $370 million for the quarter, up from $117 million during the same period last year.
Such constraints may have played a role in the pharma's decision to fund its licensing deal with Daiichi Sankyo by issuing new shares, a move that diluted current investors.
"The purpose of the equity was to pay for the upfront and the milestone in the early years for the Daiichi Sankyo acquisition as well as to strengthen our balance sheet as we have a repayment of a $1 billion bond in September of this year," said AstraZeneca chief financial officer Marc Dunoyer on Friday.
AstraZeneca lists more than $16 billion in net debt on its balance sheet, with $3.7 billion due within one year from March 31.