$AZN Analyst Blog


AstraZeneca Falls on Q1 Earnings Decline, Reiterates View – Analyst Blog

AstraZeneca plc AZN reported first-quarter 2015 core earnings of $1.08 per American Depositary Share (ADS), down 3% (at constant exchange rates or CER) from the year-ago period. Earnings were, however, a penny above the Zacks Consensus Estimate. Shares were down 1.8% following the release of first-quarter results.

Total revenues increased 1% (at CER) to $6.1 billion in the first quarter of 2015, slightly above the Zacks Consensus Estimate of $5.9 million. Key growth platforms (Brilinta/Brilique, diabetes, respiratory and Emerging Markets) performed well.

All growth rates mentioned below are on a year-on-year basis and at CER.

The Quarter in Detail

U.S. revenues declined 14% year over year in the first quarter to $2.2 billion reflecting generic competition for its two best-selling drugs, Nexium (down 53%) and Crestor (down 13%). The adverse impact of the Synagis guideline changes as well as the change in accounting related to the Branded Pharmaceutical Fee ($56 million) adversely impacted sales in the U.S.

European markets also witnessed a decline in sales (down 5%) year over year to $1.3 billion due to generic competition (Crestor and Seroquel XR) completely offsetting the favorable impact of Forxiga and Onglyza. Established RoW revenues were down 5%. Revenues in Japan decreased 2%.

Products which recorded growth in the first quarter include Onglyza (up 19% to $183 million), Bydureon (up 58% to $123 million), Byetta (up 19% to $90 million) and Pulmicort (up 17% to $286 million).

Brilinta sales were $131 million in the reported quarter, up 45% year over year. Brilinta performed well in Europe and Emerging Markets.

Other Details

AstraZeneca’s core gross margin was up 2 percentage points to 83.4% in the first quarter of 2015. Core selling, general and administrative expenses increased 10% to $2.4 billion, primarily due to investments in the company’s growth platforms.

During the quarter, core research and development expenses increased 24% to $1.3 billion, reflecting higher investments in pipeline.

Guidance Maintained

AstraZeneca maintained its 2015 guidance. The company continues to expect revenues to decline in the mid single-digit percentage range in 2015. The Zacks Consensus Estimate for 2015 currently stands at $23.8 billion.

The company expects core earnings to increase in the low single-digit percentage range in 2015. The 2015 Zacks Consensus Estimate is at $4.22 per share.

Our Take

AstraZeneca’s first-quarter results were disappointing with earnings declining year over year as two of its key drugs Nexium and Crestor, face generic competition. We expect the top and bottom line to remain under pressure.

We are nonetheless encouraged by the company’s acquisition of rights to Actavis’ ACT branded respiratory business in the U.S. and Canada, which will help strengthen its respiratory portfolio. In addition to this, AstraZeneca has lately been very active on the deal-making front targeting the highly lucrative immuno-oncology market. The company has inked multiple deals with companies including Celgene Corporation CELG and Juno Therapeutics JUNO among others.

Meanwhile, the recent launch of drugs including Lynparza (ovarian cancer), Farxiga/Forxiga (type II diabetes) and Movantik/Moventig (opioid-induced constipation) should contribute to the top line and help lessen the impact of genericization. The company expects a lot of activity on both the pipeline and regulatory front in 2015.


Please enter your comment!
Please enter your name here