What next for AstraZeneca shares post results?

AstraZeneca AstraZeneca posted a bumper set of first-quarter results, with sales up 60% to $11.4bn. Revenues beat analysts’ forecasts thanks to strong sales of its Covid-19 vaccine and Alexion medicines for rare diseases.

AstraZeneca purchased Alexion in 2020 for $39bn to diversify away from producing cancer drugs. Product sales increased by 50% to $10.98bn during the period.

Total sales from oncology products rose by 25% in the quarter, including a milestone payment, while core EPS rose 20% to $1.89.

“2022 has started strongly for AstraZeneca,” chief executive Pascal Soriot. “Farxiga [for diabetes] achieved $1bn revenue in the quarter and our oncology medicines delivered product sales growth of 18%, despite COVID-19 continuing to impact cancer diagnosis and treatment.

“High-level results from the DESTINY-Breast04 trial pointed to Enhertu’s potential to redefine treatment of HER2-low metastatic breast cancer, and Ultomiris became the first and only long-acting C5 inhibitor approved for generalised myasthenia gravis in the US.”

The pharmaceutical giant also has plans for build a new strategic research and development centre at its Cambridge, Massachusetts hub.

Drug giant’s Covid-19 fillip set to wane

The drug giant has benefited from strong sales of its Covid-19 products, with its vaccine Vaxzevria delivering $1.1bn of revenue during the period – beating analysts’ forecasts of $739m.

However, sales of the jab are expected to slow going forward due to the global oversupply of vaccines for the disease. Globally, 2.9bn shots of the vaccine have been administered so far.

AstraZeneca also has a Covid-19 antibody treatment for immuno-compromised patients for whom vaccines aren’t effective, called Evusheld.

The product has been hit by logistical issues and the UK authorities have not ordered any supplies. Indeed, CEO Pascal Soriot has called on the UK government to make the drug available for vulnerable patients.

Nevertheless, the US and numerous other markets have put in major orders for Evusheld. Sales are expected to make up for the anticipated decline of coronavirus vaccine sales.

The company also cut its forecasts for sales in China as the country seeks to cut the price of generic medicines through various initiatives.

AstraZeneca bullish on guidance

The drug giant reiterated its previous earnings guidance for the full-year. Management anticipates total sales to increase by a percentage in the high teens and core earnings per share are forecast to rise by a mid-to-high percentage in the twenties.

AstraZeneca shares are up 38% in the past 12 months to £106.88 thanks to the Covid fillip and up 52% since January 2021. As such, it may be worth taking some profits given Covid-19 vaccine sales are expected to wane.

However, the drug giant’s portfolio is much more diversified now than it was in the past. Plus, while it may see cost input inflation, pharmaceutical companies have greater pricing power than companies in many other sectors.

Analysts at JP Morgan Chase recently set a price target of £120 for the shares post the results. So there could also be further mileage in them, especially with strong trading expected this year.

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*Based on revenue excluding FX (published financial statements, October 2021).