Full year revenue rose 38% to $37.4bn, ignoring the effect of exchange rates. The coronavirus vaccine contributing $4bn. This reflected strong growth across all product categories, apart from Other Medicines.
Cash profits declined 6% to $7.6bn, this includes a $2.2bn charge related to the Alexion acquisition.
The group will pay a second interim dividend of $1.97 per share, bringing the total for the year to $2.87. The board intends to increase annual dividends to $2.90.
The shares rose 3% following the announcement.
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Our View
AstraZeneca's coronavirus vaccine has made it a household name worldwide, but the group's promise to sell the vaccine at cost ''during the pandemic'' means it's padded revenue but not profits. 2022 will pave a new road for the group's coronavirus medicines business--with vaccine sales waning and a monoclonal antibody treatment making up a larger proportion of sales, we can expect to see some of those dollars start to funnel through to the bottom line.
This in addition to the potential growth runway coming from the Alexion acquisition have given management the confidence to increase shareholder returns, but remember dividends are variable and not guaranteed.
Alexion brings rare disease treatments into the AZN fold, a fundamentally attractive area of the pharmaceutical market. The combination of Astra's massive distribution network and Alexion's specialized drugs should bring about a powerful windfall in the coming years.
Rare diseases are, by definition, uncommon. In the past spending millions, perhaps billions, on researching a drug to treat a few tens of thousands of patients worldwide didn't make financial sense. Instead attention focused on treatments for common diseases, like asthma, with patients stretching into the tens of millions. As a result, only around 5% of designated rare diseases have approved treatments.
More recently that attitude has shifted. While major diseases may have large markets, they also attract lots of competition. That means individual drugs companies can end up with a relatively small slice of a large pie. Competition in rare diseases is far lower - a drug company which develops a treatment for a previously unaddressed illness will likely end up serving the entire market and can probably attach a hefty price tag to boot. It's also unlikely a competitor will develop a more effective alternative, since competition is so much lower. Increased interest in the sector means the global rare disease market is forecasted to grow by a low double-digit percentage.
Breaking into this market didn't come cheap, though. The acquisition more than doubled Astra's debt pile and sent free cash into the red. But this pales in comparison to the potential growth the combination offers. This is particularly true when it comes to emerging markets. Alexion's been primarily selling to the US and Europe, but under Astra's wing a greater proportion can be sold further afield. This is of course dependent on regulatory approval, but as AZN already has footholds in these markets it should make the process more efficient.
Cash flow will be of utmost importance moving forward--debt now stands at more than 3 times underlying cash profits. With interest rates on the rise, we'd like to see that come down to more manageable levels. Shareholder returns are also marching higher, so the demands on cash are not insignificant. Any missteps in the Alexion integration, and the group will either have to saddle itself with more debt or trim the dividend.
Overall we think Astra is pretty well placed. It's too early to say whether the Alexion deal will deliver on its potential, but a strong core business and the promise of rising coronavirus treatment profits are encouraging. If all goes to plan the future is bright.
AstraZeneca key facts
All ratios are sourced from Refinitiv. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn't be looked at on their own - it's important to understand the big picture.
Full year Results (figures given exclude effect of exchange rates)
Revenue in Oncology (37% of revenue) rose 17% to $13.7bn, reflecting the impact of several drugs gaining regulatory approval in new markets. Oncology sales are higher margin, which boosted gross margins for the group. Imfinzi is in phase three trials and Lynparza has been given further regulatory approvals for use in the US.
BioPharmaceuticals sales increased 9% to $8.0bn, driven by strong performance of type 2 diabetes drug Farxiga.
Helped by $15m in revenue from partnerships, BioPharmaceutiacals: Respitory & Immunology sales rose 9% to $6.0bn.
The Alexion acquisition brought Rare Disease under the AZN umbrella. Revenues for this new division increased 9% to $3.1bn, helped by the impact of new use cases for the group's blood disorder treatment, Soliris.
Revenue in Other medicines declined 7% to $2.5bn, as mandatory price reductions and decreased market access in China hurt sales for Nexium, a reflux medication.
COVID-19 brought in $4.1bn, comprising mainly of Vaxzevria vaccine sales, on which the group does not earn a profit. Evusheld, a monocolonal antibody treatment, is expected to make up a greater proportion of sales moving forward, but the group will earn a profit on those sales.
Research and development expenses rose 33% to $8bn, reflecting investment in coronavirus medicines as well as the cost of testing and PPE for staff. The Alexion acquisition was primarily responsible for a 32% increase to selling and administrative costs to $15.2bn.
Net debt more than doubled to $24.3bn, reflecting the impact of the Alexion acquisition. Free cash flow was $4.9bn, up from $3.8bn, though this excludes a $9.2bn outlay related to the acquisition.
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