H1 2021 results

On July 29, 2021 AstraZeneca reported that strong revenue growth of 23% (18% at CER1) in the half to $15,540m while, in the second quarter, revenue increased by 31% (25% at CER) to $8,220m (Press release, AstraZeneca, JUL 29, 2021, View Source [SID1234585451]). Excluding the contribution from the pandemic COVID-19 vaccine, revenue increased by 14% (9% at CER) in the half to $14,371m and by 17% (12% at CER) in the quarter to $7,326m. Further pipeline progress and the recent acquisition of Alexion Pharmaceuticals Inc. (Alexion) supports the Company’s transition to long-term sustainable growth. AstraZeneca is updating its full-year 2021 guidance to reflect the contribution of Alexion in the year.

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Pascal Soriot, Chief Executive Officer, commented: "AstraZeneca has delivered another period of strong growth thanks to robust performances across all regions and disease areas, particularly Oncology, New CVRM and Fasenra in Respiratory. As a result, we have delivered further earnings progression, supported ongoing launches, and continued our investment in R&D.

We continue to advance our portfolio of life-changing medicines with further significant progress across disease areas. In Oncology, we recently presented Lynparza’s OlympiA Phase III trial at the plenary session of the 2021 American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper) Annual Meeting, and we also shared the final results from Calquence’s head-to-head trial with ibrutinib. In BioPharmaceuticals, the US approved Farxiga for chronic kidney disease and granted tezepelumab Priority Review to treat patients with asthma. Alexion will enable us to enhance our pipeline, extending the Company’s presence in rare diseases and immunology with its complement biology.

Following the successful acquisition of Alexion, we are today updating our full-year 2021 guidance; our longterm goals to accelerate scientific discovery, invest for sustainable growth and deliver more benefits for patients remains unchanged."

Highlights of Total Revenue in the half included:-

An increase in Product Sales of 24% (19% at CER) to $15,302m. New medicines8 Total Revenue improved by 31% (27% at CER) in the half to $8,332m, including growth in Emerging Markets of 35% (29% at CER) to $1,895m. Globally, new medicines represented 54% of Total Revenue (H1 2020: 50%)

-Oncology growth of 19% (15% at CER) to $6,360m and an increase in New CVRM9 of 21% (16% at CER) to $2,731m. Similarly, Respiratory & Immunology (R&I) increased by 11% (6% at CER) to $2,970m, despite the adverse impact of mature, inhaled respiratory medicines on the performance in the half

-An increase in Emerging Markets of 26% (21% at CER) to $5,459m with the performance benefitting from sales of the pandemic COVID-19 vaccine of $455m. China growth of 21% (11% at CER) to $3,209m. In the US, Total Revenue increased by 16% to $4,834m and in Europe by 33% (21% at CER) to $3,261m, also benefitting from sales of the pandemic COVID-19 vaccine of $572m 2

Alexion, acquired by AstraZeneca on 21 July 2021, does not form any part of the Company’s financial results during the period. Alexion’s post-acquisition results will be consolidated post-completion and included in AstraZeneca’s year-to-date and Q3 2021 results to be announced on 12 November 2021. Details of the acquisition are included in the subsequent events note.

Guidance Following the completion of the acquisition of Alexion on 21 July 2021 and the issuance of new shares10, the Company is updating its FY 2021 guidance at CER to include the contribution from Alexion and reflect the increase in weighted average number of shares outstanding to 1,418 million. The previous expectations issued by both companies earlier in 2021 remain broadly in line with current assumptions and underpin the updated guidance: Total revenue is expected to increase by a low-twenties percentage, accompanied by a faster growth in Core EPS to $5.05 to $5.40. The guidance does not incorporate any revenue or profit impact from sales of the pandemic COVID-19 vaccine.

In general, AstraZeneca continues to recognise the heightened risks and uncertainties from the effects of COVID-19, including the impact from potential new medicines for COVID-19 in clinical development. Variations in performance between quarters can be expected to continue.

The Company is unable to provide guidance and indications on a Reported basis because AstraZeneca cannot reliably forecast material elements of the Reported result, including any fair value adjustments arising on acquisition-related liabilities, intangible asset impairment charges and legal-settlement provisions. Please refer to the cautionary statements section regarding forward-looking statements at the end of this announcement.

Indications The Company provides indications for FY 2021 at CER:
-AstraZeneca continues its focus on improving operating leverage while allocating appropriate resources to continued investment in R&D, the support of newly launched medicines, and patient access in key markets to underpin long-term sustainable growth
-A Core Tax Rate of 18-22%. Variations in the Core Tax Rate between quarters are anticipated to continue Currency impact If foreign-exchange rates for July to December 2021 were to remain at the average of rates seen in the half, it is anticipated that there would be a low single-digit favourable impact on Total Revenue and Core EPS. The Company’s foreign-exchange rate sensitivity analysis is contained within the operating and financial review.

Financial summary-Total Revenue, comprising Product Sales and Collaboration Revenue, increased by 23% in the half (18% at CER) to $15,540m. Product Sales grew by 24% (19% at CER) to $15,302m, driven primarily by the performances of new medicines across Oncology and BioPharmaceuticals, including Tagrisso, Calquence and Farxiga. Total Revenue included $1,169m of pandemic COVID-19 vaccine sales-The Reported Gross Profit Margin11 declined by seven (six at CER) percentage points to 73.5% and the Core Gross Profit Margin declined by seven (six at CER) percentage points in the half to 73.8%.

The performance predominantly reflected the significant impact of the equitable supply, at no profit to AstraZeneca, of the pandemic COVID-19 vaccine, together with an increasing impact from profit-sharing arrangements, primarily Lynparza and roxadustat, and the impact of the Chinese National Reimbursement Drug List (NRDL) and the value-based procurement (VBP) patient-access programmes. A higher proportion of Oncology sales and increasing patient access in China partially offsets these impacts.

These variations in gross margin performance between periods can be expected to continue-Reported Total Operating Expense increased by 17% (12% at CER) in the half to $9,771m and represented 63% of Total Revenue (H1 2020: 66%). Core Total Operating Expense increased by 17% (12% at CER) to $8,511m and comprised 55% of Total Revenue (H1 2020: 57%) 3-Reported and Core R&D Expense increased in the half by 28% (22% at CER) to $3,542m and by 27% (21% at CER) to $3,439m, respectively.

The increases primarily reflected the Company’s continued investment in its COVID-19 vaccine and potential new medicines to prevent and treat COVID-19. The increases also reflected the investment in several late-stage Oncology trials, including datopotamab deruxtecan, and the advancement of a number of Phase II clinical development programmes in BioPharmaceuticals, mainly in CVRM-Reported SG&A Expense increased by 13% (7% at CER) in the half to $6,027m; Core SG&A Expense increased by 12% (7% at CER) to $4,870m, representing 31% of Total Revenue (H1 2020: 34%).

The increases were driven by additional SG&A investment in launches of Oncology medicines, the launch of several BioPharmaceutical medicines, particularly in the US, and AstraZeneca’s further expansion in China-Reported Other Operating Income and Expense12 increased by 117% (116% at CER) in the half to $1,308m. Core Other Operating Income and Expense increased by 117% (115% at CER) to $1,309m during the period. The growth predominately reflected the $776m of income from the divestment of AstraZeneca’s 26.7% share of Viela Bio, Inc. (Viela) as part of the acquisition by Horizon Therapeutics plc-The Reported Operating Profit Margin was stable in the half (increased by one percentage point at CER) to 19.4%; the Core Operating Profit Margin decreased by one percentage point (stable at CER) to 27.9%.

The performance predominately reflected the aforementioned one-time benefit from Other Operating Income and Expense11-Reported EPS of $1.61 in the half represented an increase of 37% (45% at CER). Core EPS grew by 26% (27% at CER) to $2.53. Reported and Core EPS were adversely impacted by $0.04 due to the pandemic COVID-19 vaccine-An unchanged first interim dividend of $0.90 (64.8 pence, 7.77 SEK) per ordinary share