AstraZeneca's second quarter results show lower total sales and a higher spend on commercial and medical support for new drugs. That combination led operating profit down 22% to $1.3bn, but the drop isn't as big as had been expected.
The shares rose 1% on the news.
The interim dividend remains unchanged at $0.90 per share.
After losing patent protection on some key drugs a few years ago, Astra's revenue and profits have been trending down since 2014. However, analysts expecting revenues and profits to hit an inflexion point in the next year.
That's because the much-vaunted pipeline is starting to deliver.
Progress in growth platforms has been encouraging, with recently approved oncology drugs a particular stand out. The decision to expand the geographic footprint into Emerging Markets and Japan should mean Astra can make the most of new drugs as and when they arrive.
But despite those green shoots, organic free cash flows still aren't strong enough to pay the dividend.
That means Astra will be relying on debt and externalisation deals, where it sells stakes in some of its smaller drugs for cash up front and is left with just a small ongoing interest, to fund the dividend for another year at least.
That's clearly unsustainable in the long run. But if all goes to plan, the decision to hold the dividend steady during the lean tines will be more than vindicated.
CEO Pascal Soriot has been targeting annual revenues in excess of $45 billion by 2023, compared to $22.5bn in 2017.
That confidence is based on the potential of the 130 projects making their way through Astra's pipeline. That bodes well - although until a drug passes the final regulatory hurdles there's no guarantee all those millions spent on development will be worth anything at all.
Analysts are forecasting a prospective yield of 3.8% for those prepared to see if the men and women in white coats can deliver.
Second quarter details (at constant exchange rates)
AstraZeneca generated a shade over $5bn of product sales in the quarter, slightly ahead consensus forecasts. Externalisation revenue of $125m brought total sales to $5.2bn. This is 1% lower than what was reported last year, as falling sales of off-patent Crestor more than offset strong growth in new product sales.
Among Astra's new drugs, lung cancer treatment Tagrisso, which saw sales rise 77% to $422m, and Lynparza, where a new approval for the use in the treatment of breast cancer and increased use in the treatment of ovarian cancer and helped deliver $150m of sales, were highlights.
Those treatments contributed to oncology sales rising 40% to $1.4bn. Elsewhere, Respiratory sales rose 7% to $1.2bn, but the decline in Crestor sales led Cardiovascular, Renal and Metabolic drug sales down 11% to $1.6bn. Other drug sales fell 33% to $747m.
Spending on research & development was 1% lower, at $1.4bn. Coming after a drop in Q1, that ensured R&D costs fell 9% over the first half as a whole. Restructuring costs, down to 62% to $187m and capital expenditure, down 11.5% to $486m, also dropped over the half.
Pascal Soriot, AstraZeneca CEO said "The performance in the first half demonstrated that we remain firmly on track to return our company to Product Sales growth in 2018."
Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Thomson Reuters. These estimates are not a reliable indicator of future performance.
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