AstraZeneca Earnings: Core Product Growth and Strong Pipeline Advancement Offset Lost COVID-19 Sales

AstraZeneca AZN reported solid first-quarter results slightly above our expectations, but we don’t expect any major change to our fair value estimate. While COVID-19 product sales were down as expected with the pandemic receding, core products continue to post solid growth while the pipeline is making excellent strides to reinforce the firm’s wide moat.

Excluding COVID-19 vaccine and treatment sales, Astra posted 15% operational growth, led by cancer drugs Tagrisso, Imfinzi, Lynparza, Calquence and Enhertu. We expect these drugs to continue to post steady gains based on excellent efficacy, line extensions into new indications, and limited patent losses in the near term. One key potential competitive threat to Tagrisso may emerge with Johnson & Johnson’s new EGFR treatment, which will likely post head-to-head data versus Tagrisso later in the year. However, Tagrisso’s solid entrenchment will likely be difficult to displace without significantly better efficacy. Additionally, cardiometabolic drug Farxiga posted strong gains, but the likely 2025 patent loss will limit this drug’s long-term contributions unless combinations with new drugs (balcinrenone and zibotentan) prove successful.

Beyond executing well with the current portfolio, Astra is laying a strong pipeline foundation, setting up one of the best long-term outlooks in the industry based on limited near-term patent losses and a leading number of late-stage potential blockbusters. In the late-stage pipeline, we remain most bullish on cancer drugs camizestrant (a selective estrogen receptor degrader with excellent phase 2 breast cancer data), capivasertib (an AKT inhibitor with excellent phase 3 breast cancer data), datopotamab deruxtecan (a riskier oncology asset targeting TROP2), ceralasertib (a riskier oncology asset targeting ATR), and rare-disease drug danicopan (positive top-line phase 3 data).