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AstraZeneca’s (AZN - Free Report) fourth-quarter 2022 core earnings of 69 cents per American depositary share (ADS) beat the Zacks Consensus Estimate of 68 cents. Core earnings of $1.38 per share declined 17% year over year on a reported basis and 5% at constant exchange rates (CER).

Total revenues were $11.21 billion, down 7% on a reported basis. However, total revenues rose 1% at CER in the quarter. Revenues missed the Zacks Consensus Estimate of $11.34 billion and our estimates of $11.49 billion.

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

Product Sales Rise

Product sales rose 2% at CER to $10.8 billion. Collaboration revenues were $409 million, down 19% from the year-ago quarter levels.

Among AstraZeneca’s various therapeutic areas, Oncology product sales were up 18%. CVRM product sales were up 22%, while the Respiratory & Immunology segment declined by 3%. Vaccines & Immune Therapies sales declined 44%. Rare disease product sales were up 10%. Sales of other medicines rose by 7%.
 

Sales of Some Key Drugs

In Oncology, Tagrisso recorded sales of $1.34 billion, up 12% year over year on strong demand as a first-line and adjuvant treatment. However, year-end ordering dynamics in China hurt sales to some extent in the quarter. Tagrisso sales missed the Zacks Consensus Estimate of $1.44 billion.

Imfinzi generated sales of $752 million in the quarter, up 27% year over year, driven by increased use in GI, liver, and lung cancer. Imfinzi sales missed the Zacks Consensus Estimate of $799 million.

Lynparza product revenues rose 17% year over year to $689 million, owing to growth in use in breast, ovarian, and prostate cancers in the United States as well as the launch of early breast cancer in the country in March 2022. Increased use in first-line HRD-positive ovarian cancer and increased uptake for an expanded label in breast cancer boosted sales in Europe. Lynparza sales were better than the Zacks Consensus Estimate of $688 million.

AstraZeneca markets Lynparza in partnership with Merck (MRK - Free Report). The profit-sharing deal between AstraZeneca and Merck was inked in 2017. In addition to Lynparza, the deal included Koselugo.

AstraZeneca & Merck’s Lynparza is approved for four cancer types, namely ovarian, breast, prostate, and pancreatic. Lynparza is also being evaluated in an earlier-line setting for the approved cancer indications as well as some other cancer types.

Calquence generated sales of $588 million in the quarter, up 53% year over year, benefiting from the increased new patient market share.

Sales of AstraZeneca’s legacy cancer drugs, such as Iressa, Faslodex, Arimidex, and Casodex declined during the quarter. However, sales of Zoladex rose in the quarter.

In CVRM, Brilinta/Brilique sales were $345 million in the reported quarter, up 4% year over year, primarily due to a one-time adjustment and some post-pandemic recovery of oral antiplatelet medicines like Brilinta in the United States and the EU. Pricing pressure from the VBP (volume-based procurement) program continued to hurt sales in China.

Farxiga recorded product sales of $1.18 billion in the quarter, up 52% year over year, reflecting volume growth across all regions and growth of the SGLT2 inhibitor class in general. The label expansion approvals for heart failure with reduced ejection fraction and chronic kidney disease indications contributed to Farxiga’s sales growth in the United States and Europe. In Emerging markets, Farxiga is witnessing growth in ex-China Emerging Markets.  Farxiga sales beat the Zacks Consensus Estimate of $1.17 billion by a slight margin.

In Respiratory & Immunology, Symbicort sales declined 2% in the quarter to $620 million. Pulmicort sales declined 28% to $166 million.

Fasenra recorded sales of $381 million in the quarter, up 12% year over year, driven by increased market share performance in Europe and the United States due to market leadership. However, sales were hurt somewhat due to price adjustments and the impact of rising COVID cases in Japan. Fasenra sales were better than the Zacks Consensus Estimate of $373 million.

AstraZeneca’s new triple combo COPD treatment Breztri recorded sales of $116 million in the quarter compared with $103 million in the previous quarter.

A new lupus drug, Saphnelo (anifrolumab) recorded sales of $48 million in the quarter, compared with $33 million in the previous quarter.

In the Rare Disease portfolio, which was added following the 2021 Alexion acquisition, Soliris recorded sales of $844 million, down 16% year over year due to conversion to Ultomiris. Ultomiris and Strensiq sales were $593 million and $272 million, up 62% and 27%, respectively.

In Other Medicines, sales of Nexium rose 7% to $300 million.

In Vaccines & Immune Therapies, AstraZeneca’s COVID-19 vaccine, Vaxzevria, generated $85 million of revenues, much less than $173 million in the previous quarter due to the conclusion of several contracts. No revenues were recorded in the U.S. market after the first quarter of 2022.

AZN’s COVID-19 antibody cocktail medicine Evusheld generated $734 million in sales, compared with $537 million in the previous quarter.
 

Profit Discussion

AstraZeneca’s core gross margin of 77.2% was up 4 percentage points at CER as the dilutive effect from profit-sharing arrangements, increased pricing pressure in China, inventory write-downs, and manufacturing termination fees for Evusheld were offset by a positive mix due to increased contribution from oncology and rare disease medicines. Core selling, general and administrative expenses increased 15% to $3.58 billion.

Core research and development expenses rose 12% to $2.53 billion. Core operating profit declined 10% to $2.61 billion in the quarter. The core operating margin was 23.3% in the quarter, down 3 percentage points at CER.
 

2022 Results

Full-year 2022 sales rose 18% on a reported basis and 24% at CER to $43 billion. Revenues missed the Zacks Consensus Estimate of $44.31 billion.

Core earnings per share for 2022 were $6.66 per share. Core earnings per share rose 26% year over year on a reported basis and 33% at constant exchange rates (“CER”), in line with the guided range of the high 20s to low 30s percentage. Core earnings were $3.33 per American depositary share (“ADS”), which beat the Zacks Consensus Estimate of $3.30.
 

2023 Guidance

AstraZeneca expects total revenues to increase in the low-to-mid single-digit percentage in 2023 at CER including its COVID products. Excluding the COVID products, total revenues are expected to increase in the low double-digit percentage.

Core earnings per share are expected to increase in the high single-digit to low double-digit percentage in 2023.

Foreign exchange is expected to have a low single-digit percentage adverse impact on total revenues as well as on core EPS in 2023.

Core operating expenses are expected to increase by a low-to-mid single-digit percentage
 

Our Take

AstraZeneca’s fourth-quarter results were mixed as it beat estimates for earnings but missed the same for sales. Higher sales of key medicines across Oncology and CVRM units like Tagrisso, Lynpaza, and Farxiga were offset by a steep decline in sales of AstraZeneca’s COVID vaccine, Vaxzevria. Excluding Vaxzevria, total revenues in the quarter increased by 17%.

However, AstraZeneca’s sales outlook for 2023 looks encouraging as it expects sales, excluding COVID products, to rise by a double-digit percentage. In response, AstraZeneca’s stock was up almost 6% in pre-market trading on Thursday.

AstraZeneca stock has risen 9.9% in the past year compared with an increase of 9.3% for the industry.

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In fact, in 2023, AstraZeneca expects minimal revenues from Vaxzevria, while its overall revenues from COVID products are expected to decline significantly from the 2022 level.

AstraZeneca has been seeing slower sales growth in China since the second half of 2021. Sales in China are being hurt due to pricing pressure associated with National Reimbursement Drug List and VBP programs. However, in 2023, AstraZeneca expects China sales to return to growth and increase by a low single-digit percentage.

AstraZeneca is making rapid progress across its pipeline. AstraZeneca said it received 34 approvals in major markets in 2022. It expects pipeline candidates like camizestrant, datopotamab deruxtecan and volrustomig to enter late-stage development in 2023 and is set to launch at least 15 new medicines before the end of the decade,
 

Zacks Rank & Stocks to Consider

AstraZeneca has a Zacks Rank #3 (Hold).

AstraZeneca PLC Price, Consensus, and EPS Surprise

AstraZeneca PLC price-consensus-eps-surprise-chart | AstraZeneca PLC Quote

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