Summary
- Sees profit increase in 2023
- Investors focus on margins in 2023 as operating expenses grow
- Drugmaker’s shares have outranked rivals since 2020
- Shares gain as much as 5%
AstraZeneca (AZN.L) on Thursday said it was ready for growth in 2023 and further on, relying on its burgeoning line-up of cancer, metabolic, and rare disease drugs to pick up the pace from waning COVID product sales.
Its shares soared as much as 5% to be the second-best performer in London’s blue-chip FTSE 100 (.FTSE) index, on course for their best day in a year.
CEO Pascal Soriot said the company was on a path to deliver at least 15 new medicines this decade and said it expects to start at least 30 new late-stage clinical trials this year.
The firm also forecast a return to growth in China, one of its major markets, after posting a second successive quarter of growth even as drug prices there continue to be under pressure.
“We move into 2023 very much on track to deliver our industry-leading growth ambitions for 2025, but also beyond until 2030,” Soriot told a news briefing.
Soriot, who took the helm in 2012, has reversed the fortunes of the Anglo-Swedish drugmaker after it was hit by a string of patent losses and a series of clinical trial failures.
But like many other sectors and its own peers, AstraZeneca has struggled with surging costs linked to the conflict in Ukraine and the prolonged effects of the pandemic in 2022.
With AstraZeneca’s extensive pipeline and an existing wide portfolio of drugs – which incur ever-rising R&D and selling costs – investors and analysts are especially focused on the company’s profit margins.
Operating profit margins have soared from around 27% in 2021 to 30% in 2022 and the plan is to continue to steadily boost them, CFO Aradhana Sarin said.
On Thursday, AstraZeneca predicted core operating expenses would increase by a low-to-mid single-digit percentage this year.
“Given the concerns around margins going into results, we think this result/guide is good,” Barclays analyst Emily Field said.
Adjusted earnings per share in 2023 are expected to increase by a “high single-digit to low double-digit percentage”, and revenue to grow by a “low-to-mid single-digit percentage”, at constant currency rates.
The firm’s pipeline has got numerous candidates with an earning potential of $1 billion a year – if it can turn those into approved drugs then it can maintain a sector-leading pace of growth for several years to come, said Steve Clayton, fund manager for Hargreaves Lansdown, which owns AstraZeneca stock.
“But pipelines have been known to leak, so it is very much AstraZeneca’s case to prove,” he added.
Fourth Quarter Profits For AstraZeneca
The drugmaker posted better-than-anticipated fourth-quarter profit, though revenue was just slightly less than company-compiled analyst estimates, hurt by a slump in sales of its COVID vaccine and slightly lower-than-predicted sales of certain key medicines.
Drug prices in China continue to be under pressure, and before the country’s recent withdrawal of its zero-COVID policy, fewer patients were being diagnosed and looking for care.
Sales began to pick up in the back half of last year and in the fourth quarter rose by 3% at constant currency rates.
Buy Crypto NowAstraZeneca shares have outranked rivals in recent years, rising 41% since January 2020 because of its success in oncology and recently in rare disease drug sales.
Its shares also surged during the first few years of the pandemic after it developed a COVID vaccine in partnership with Oxford University.
Sales have dwindled though as shots made by Moderna (MRNA.O) and Pfizer (PFE.N) have come to take over the market.
CEO Soriot told a media briefing that he does not intend to resign as CEO anytime soon, though there are “several potential successors” the board has in mind.
