AstraZeneca’s AZN second-quarter 2022 core earnings of 86 cents per American depositary share (ADS) beat the Zacks Consensus Estimate of 78 cents. Core earnings of $1.72 per share rose 92% year over year on a reported basis and 89% at constant exchange rates (CER).

Total revenues were $10.77 million, up 31% on a reported basis and 37% at CER to $10.77 billion in the quarter, driven by higher product sales. Revenues beat the Zacks Consensus Estimate of $10.435 billion.

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

Product Sales Rise

Product sales rose 38% at CER to $10.63 billion.  Collaboration revenues were $141 million, down 20% year over year.

Among AstraZeneca’s various therapeutic areas, Oncology product sales were up 20%. CVRM product sales were up 19%, while the Respiratory & Immunology segment gained 1%. Vaccines & Immune Therapies sales rose 12%. Rare disease product sales were up 12%. Sales of other medicines declined 10%.

Sales of Some Key Drugs

In Vaccines & Immune Therapies, AstraZeneca’s COVID-19 vaccine, Vaxzevria, generated $451 million of revenues compared with $1.09 billion in the previous quarter. While the company recorded no Vaxzevria revenues in the United States, revenues declined in Europe and Emerging markets in the second quarter. AZN’s new COVID-19 antibody cocktail medicine Evusheld generated $445 million worth of sales, compared with $469 million in the previous quarter.

In Oncology, Lynparza product revenues rose 20% year over year to $673 million, owing to growth in use in ovarian and prostate cancer in the United States as well as the launch in early breast cancer in the country in March. Additional reimbursements, increasing BRCAm-testing rates and successful label expansion boosted sales in Europe.

AstraZeneca markets Lynparza in partnership with Merck MRK. The profit-sharing deal between AstraZeneca and Merck was inked in 2017. In addition to Lynparza, the deal includes 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.

Tagrisso recorded sales of $1.4 billion, up 12% year over year on strong demand as a first-line and adjuvant treatment. Inclusion in the National Reimbursement Drug List (NRDL) and COVID-related lockdowns in China hurt sales in the Emerging Markets that was more than offset by expansion into the first-line setting in China and continued growth in other Emerging Markets.

Imfinzi generated sales of $695 million in the quarter, up 20% year over year, driven by increased demand for ES-SCLC indication. COVID-19 continued to hurt lung cancer diagnosis rates, mainly in the United States.

Calquence generated sales of $489 million in the quarter, up 77% year over year, benefiting from increased new patient market share.

In CVRM, Brilinta/Brilique sales were $350 million in the reported quarter, down 4% year over year, primarily due to the impact of COVID-19 (reflecting fewer elective procedures) in the United States and the EU and pricing pressure from the VBP (volume-based procurement) program in China.

Farxiga recorded product sales of $1.1 billion in the quarter, up 59% 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 Respiratory & Immunology, Symbicort sales declined 6% in the quarter to $614 million as the global market for ICS/LABA products faces increased competition from fixed-dose triple therapies (LAMA64/LABA/ICS). Pulmicort sales declined 28% to $116 million.

Fasenra recorded sales of $354 million in the quarter, up 15% year over year, driven by increased market share performance in Europe and the United States due to market leadership.

AstraZeneca’s new triple combo COPD treatment Breztri recorded sales of $93 million in the quarter compared with $87 million in the previous quarter.

New lupus drug, Saphnelo (anifrolumab) recorded sales of $24 million in the quarter, compared with $11 million in the previous quarter.

In the Rare Disease portfolio, which was added following the Alexion acquisition in July 2021, Soliris recorded sales of $1.03 billion, up 2% year over year. Ultomiris and Strensiq sales were $434 million and $242 million, up 31% and 18%, respectively.

In Other Medicines, sales of Nexium rose 12% to $343 million.

Profit Discussion

AstraZeneca’s core gross margin of 82.9% was up 8% at CER. Core selling, general and administrative expenses increased 33% to $3.14 billion.

Core research and development expenses rose 40% to $2.43 billion. Core operating profit rose 87% to $3.37 billion in the quarter. The core operating margin was 31.2% in the quarter, up 8% year over year.

2022 Guidance

AstraZeneca raised its sales growth guidance for 2022 while keeping the earnings growth expectations intact.

AstraZeneca expects total revenues to increase in the low twenties percentage in 2022 compared with the previous expectation of high teens growth. The guidance includes the full-year contribution from the COVID-19 vaccine.

AstraZeneca expects total revenues from COVID-19 medicines to be broadly flat compared with 2021 levels with an expected decline in sales of the COVID-19 vaccine being partially offset by growth in Evusheld sales. Previously, AstraZeneca expected a decline in its total revenues from COVID-19 medicines in 2022 by a low-to-mid-twenties percentage.

AstraZeneca expects a mid-single-digit percentage decline in revenues in China in 2022 from 2021. However, the decline in China is expected to be offset by strong growth in ex-China emerging markets. AstraZeneca expects mid-single-digit sales growth in Emerging Markets (including China) in 2022.

Core operating expenses are expected to increase by a mid-to-high teens percentage (previously low-to-mid teens percentage) in 2022.

Core earnings are expected to increase at a mid-to-high twenties percentage in 2022 (maintained). The core tax rate is expected to be between 18% and 22%.

Our Take

AstraZeneca’s second-quarter results were encouraging as it beat estimates for both earnings and sales. Product sales growth was driven by higher sales of key medicines across Oncology and CVRM units like Tagrisso and Farxiga, which offset some negative impacts from the pandemic and slower sales growth in China. The rare disease drugs added following the Alexion acquisition also aided sales growth.

Sales in China were hurt due to pricing pressure associated with the NRDL and VBP programs and COVID-19-related lockdowns.

Encouragingly, AstraZeneca raised its sales expectations for 2022 due to better sales expectations for COVID-19 medicine, Evusheld and continued strong performance of its business.

Despite the second-quarter beat, AstraZeneca’s shares declined more than 2.2% in pre-market trading probably due to a below-par sales contribution of its COVID products, Vaxzevria and Evusheld in the second quarter.

AstraZeneca stock has risen 14.6% this year sofar compared with an increase of 12.5% for the industry.

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Zacks Rank & Stocks to Consider

AstraZeneca has a Zacks Rank #3 (Hold). Some better-ranked stocks in the biotech sector include Eli Lilly LLY and BioNTech BNTX, each of which has a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AstraZeneca PLC Price, Consensus and EPS Surprise

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

Eli Lilly’s stock has risen 34.8% this year. Estimates for Eli Lilly’s 2022 earnings have gone up from $8.28 to $8.34 per share, while those for 2023 have increased from $9.47 to $9.55 per share over the past 30 days.

Eli Lilly has a four-quarter earnings surprise of 2.26%, on average.

BioNTech’s stock is down 4.2% this year so far. Earnings estimates for 2023 have gone up from $15.60 per share to $16.27 per share over the past 60 days.

Earnings of BioNTechbeat estimates in all the last four quarters, the average surprise being 56.87%.

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