- AstraZeneca's promised return to growth has begun slowly; Group sales of $5.16 billion came in ahead of expectations, but were still down about 1% year-over-year on a constant exchange rate basis. The beat was driven by 69% growth in new products like Lynparza, Tagrisso and Imfinzi during the first half, as well as a boost in sales in China.
- Overall product sales growth is still being pulled down by Crestor's fall off the patent cliff; the additional loss of exclusivity in Europe and Japan cut the legacy statin's product sales by 39% overall, despite 33% growth in China. Divestments of non-core and older products also impacted sales, while boosting cash reserves.
- The company reiterated the 2018 guidance of a low single-digit percentage increase in product sales and core EPS of $3.30 to $3.50.
AstraZeneca has been working at restructuring for the past decade or so, following a decline in sales and R&D productivity, and has been promising a return to growth throughout this time. Growth has been slow, and involved a battle against generic competition. It has been supported, however, by a rejuvenated pipeline, sell-offs of older and non-key drugs, and a renewed focus on three key areas: oncology, respiratory, and cardiovascular and metabolic diseases (CVMD).
These three areas, dubbed "new medicines" by the company, saw growth of 14% in the first half of 2018, and 19% in the second quarter alone. This makes up around 70% of AstraZeneca's current sales. Products sales for the remaining 30%, mainly older drugs, fell by 25% in the first half and 32% in the second quarter, indicating a reducing effect for these drugs.
"Our strategy is starting to bear fruit," said CEO Pascal Soriot. "We are facing headwinds from patent expiries, including the impact of Seroquel next year, but these will lessen and new product growth will come though. We are at a pivot point."
According to Soriot, return to sales growth is expected in the second half of 2018, as the impact from the patent expiry of Crestor in Europe and Japan and from the divestments eases.
"The impact of Crestor should be out by the end of this year, and we predict low single-digit growth in product sales in 2018," said Soriot.
New medicines in oncology grew by 37% in the first half of 2018, and 40% in the second quarter, driven by sales of Lynparza (olaparib), Tagrisso (osimertinib) and Imfinzi (durvalumab). New oncology now makes up 27% of total product sales.
"Total oncology sales are over $2.6 billion. For the first time in the second quarter, there was a greater input from the new oncology drugs than from the older ones," said Dave Fredrickson, head of the oncology business unit.
All is not quite well in cancer however; Soriot quietly dropped into the call the failure of a trial of selumetinib in thyroid cancer, simply saying the study did not meet its primary endpoint. This drug is part of a collaboration with Merck & Co., and had previously flunked Phase 3 trials in non-small cell lung cancer and metastatic melanoma that had spread to the eye. A footnote to the earnings presentation noted the drug is no longer being studied in Phase 3 for the thyroid indication.
The emerging markets are proving strong for AstraZeneca, with 24% growth in China, and 10% overall, pulled down by declines in Russia. Growth was strong in all three of the main therapy areas, particularly oncology. AstraZeneca has been pushing forward into China, including a standalone joint venture created in 2017.
"It has been said to us 'you now have the pipeline – do you have the commercial strength?' I think we can say yes," added Soriot.