AstraZeneca Earnings: Broad-Based Portfolio Supports Solid Gains, but Deceleration Expected

AstraZeneca AZN reported strong second-quarter results largely in line with our projections and consistent with our fair value estimate. The results included a one-time gain from the rearrangement of the deal with Sanofi and Sobi for respiratory syncytial virus treatment Beyfortus, which led to a bolus in earnings growth that will not likely recur. Excluding COVID-19 product sales, total sales increased 16% with broad-based support, but we expect growth to decelerate as the portfolio matures. Cancer drugs increased 18%, led by Tagrisso, Imfinzi, Lynparza, and Calquence. While these drugs are still gaining new indications, we expect their growth to slow as the core indications are getting saturated. However, more recently launched cancer drug Enhertu holds significant potential for growth. Outside of cancer, cardiometabolic drug Farxiga posted 41% growth and represented the firm’s largest drug in the quarter. While we expect continued robust growth for Farxiga over the remainder of the year, the 2024-25 patent losses will create a major headwind to Astra’s growth potential. Also, respiratory drug Symbicort will likely face increased generic pressure in 2023, adding another headwind to growth.

Despite the maturing portfolio, we still expect close to 5% annual sales growth over the next five years, partly driven by continued advancements in the pipeline that support the company’s wide moat. We project well over $1 billion in annualized sales from five late-stage drugs: camizestrant (breast cancer), capivasertib (breast cancer), eplontersen (rare disease), danicopan (rare disease), and tozorakimab (respiratory). Even though initial data from the first pivotal study for datopotamab deruxtecan in lung cancer suggested a less favorable profile, we still believe the drug holds potential. Key phase 3 data for the drug in breast cancer is expected in late 2023 or 2024, followed by phase 3 lung cancer data in 2026-27.