AstraZeneca plc AZN reported second-quarter 2015 core earnings of $1.21 per American Depositary Share, up 3% (at constant exchange rates or CER) from the year-ago period. Earnings were significantly above the Zacks Consensus Estimate of 52 cents per share. Shares were up 2.2% following the release of second-quarter results.
Total revenues increased 2% (at CER) to $6.3 billion in the second quarter of 2015, partly reflecting income from the immuno-oncology focused strategic collaboration with Celgene Corporation CELG. Revenues were above the Zacks Consensus Estimate of $6.1 billion.
Key growth platforms (Brilinta/Brilique, diabetes, respiratory, Emerging Markets and Japan) performed well.
All growth rates mentioned below are on a year-on-year basis and at CER.
The Quarter in Detail
U.S. revenues declined 3% year over year to $2.4 billion in the second quarter. European markets too witnessed a 5% decline in sales to $1.3 billion. Revenues from Emerging Markets climbed 9% to $1.4 billion in the reported quarter supported by strong growth in China (up 10% to $583 million). Revenues in Japan increased 6% reflecting the completion of anniversary of the mandated Apr 2014 biennial price cut.
AstraZeneca’s core products, Nexium and Crestor, witnessed a decline in sales in the reported quarter. Nexium recorded sales of $647 million (down 27%) in the second quarter of 2015 with sales in the U.S. coming in at $254 million (down 44%). We note that Nexium went off patent in the U.S. from May 2014 leading to the entry of generics.
Crestor sales were $1.3 billion (down 3%) with sales down both in the U.S. (1%, $760 million) and the EU (9%, $226 million).
Products which recorded growth in the second quarter include Pulmicort (up 19% to $232 million), Bydureon (up 29% to $140 million), Seloken/Toprol – extended release (up 6% to $184 million), Zoladex (up 14% to $215 million), Faslodex (up 9% to $172 million) and FluMist/Fluenz (up 180% to $14 million).
Brilinta sales were $144 million in the reported quarter, up 38%. Brilinta performed well in Europe and Emerging Markets.
Other Details
AstraZeneca’s core gross margin was up 1.1 percentage points to 83.5% in the second quarter of 2015. Core selling, general and administrative expenses decreased 1% to $2.2 billion.
During the quarter, core research and development (R&D) expenses increased 23% to $1.4 billion. However, the company anticipates a moderation in the R&D rate in the second half of 2015.
2015 Revenue Outlook Upgraded
AstraZeneca revised its 2015 revenue guidance keeping its earnings view unchanged. The company now expects revenues to decline in the low single-digit percentage range in 2015 (previous guidance: mid single-digit percentage range).
The company continues to expect core earnings to increase in the low single-digit percentage range in 2015, reflecting continued accelerated investment in R&D.
Our Take
AstraZeneca’s second-quarter results were encouraging with the company beating both top- and bottom-line estimates. Meanwhile, newly launched drugs Lynparza (ovarian cancer), Farxiga/Forxiga (type II diabetes) and Movantik/Moventig (opioid-induced constipation) should continue to contribute to the top line and help ease the impact of genericization. The company expects regulatory decisions, submissions and major data presentations and readouts this year.
AstraZeneca currently carries a Zacks Rank #3 (Hold). Actelion Ltd. ALIOF and Isis Pharmaceuticals, Inc. ISIS are some better-ranked stocks in the health care sector, each carrying a Zacks Rank #1 (Strong Buy).
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