Share your thoughts on our News & Insights section. Complete our survey to help us improve.

Share research

AstraZeneca - 2023 guidance upgraded after solid Q3

Revenue for the first nine months grew by 5% to $33.8bn, ignoring the impact of currency movements.

No recommendation - No news or research item is a personal recommendation to deal. All investments can fall as well as rise in value so you could get back less than you invest.

Prices delayed by at least 15 minutes

This article is more than 6 months old

It was correct at the time of publishing. Our views and any references to tax, investment, and pension rules may have changed since then.

Revenue for the first nine months grew by 5% to $33.8bn, ignoring the impact of currency movements. Growth was 15%, when excluding the $2.9bn decline from COVID-19 medicines. The main drivers of this uplift were strong performances by Oncology, CVRM (Cardiovascular, Renal and Metabolism) and Rare Disease.

Underlying operating profit was up 16% to $11.8bn including a $0.7bn non-cash gain from an amended partnership. Net debt has grown $0.4bn year to date to $23.4bn.

Full year guidance has been improved. Excluding COVID-19 sales, revenue is now set to grow in the low teens, with underlying earnings per share in a low double digit to low teens range.

AstraZzeneca also announced that it had in-licensed an early stage oral candidate for conditions such as obesity and type-2 diabetes. There was also a positive readout from a late stage liver-cancer trial.

The shares were up 2.8% in early trading.

View the latest AstraZeneca share price and how to deal

Our view

AstraZeneca has more than offset the collapse in sales of COVID-19 medicines, with higher value speciality medicines. It's also continued to drive forward its pipeline of new products, an area where Astra's hit rate in the clinic has been impressive. And the diverse late-stage pipeline means there are lots of potential shots on goal.

But previous success means it's set the bar high for itself. And as rRecently, disappointing clinical results have proved, that investors can take fright when therapeutic benefits of new drug candidates fall short of their expectations. There's a very deep pipeline, but Ggiven the risks inherent in drug discovery, nothing's guaranteed.

Cancer treatments (about a third of sales) are a cornerstone of Astra's offering, and have remained a key growth driver. Often these drugs can maintain high growth levels for many years, as patient access improves, approvals are gained in new markets, and clinical trials prove their efficacy in additional diseases.

Astra's also using its firepower to beef up the research pipeline through deals with other players in the space. It's seeing some strong growth from the portfolio acquired with Alexion in the lucrative rare diseases market. The recent $1bn acquisition of preclinical assets from Pfizer could also present some exciting opportunities in this space. But any commercial launches from this deal are likely to be some years away. The in-licensing of ECC5004, a novel GLP-1RA candidate for obesity and conditions such as type-2 diabetes, is likely to attract a lot of attention. In the same vein, a potential submission for clinical approval would be much further down the line.

Net debt is sitting at about 1.4x market forecasts for cash profits this year which doesn't look too demanding. However, it's something to keep an eye on. The group's likely to put more money into research and development. Continuing success in drug approvals will be needed in order to offset the potential loss of revenue from patent expirations over the coming years. For now, however, Astra is generating strong cash flows from its existing portfolio of marketed medicines. This also supports the modest dividend yield, though nothing is guaranteed.

Whilst tThe valuation has come down from the heights seen during the pandemic, but it still sits towards the top end of its peer group. This premium isn't without merit. Its growth record is also towards the top of the table, but this does bring added pressure to keep delivering.

Environmental, social and governance (ESG) risk

The pharmaceuticals sector is relatively high-risk in terms of ESG. Product governance, particularly with safety and marketing, and affordable access to treatment are the key risk drivers. Labour relations, business ethics and bribery and corruption are also contributors to ESG risk.

According to Sustainalytics, AstraZeneca's overall management of material ESG issues is strong. The executive compensation plan includes a target to eliminate greenhouse gas emissions by 2025, and the sustainability strategy is overseen by upper management. AstraZeneca has implemented a robust programme to monitor patient safety trends and ensure the quality and efficacy of its products. Access to healthcare is a key strategic priority. The company has a strong human capital development programme with initiatives to recruit and retain highly specialised employees, highly pertinent following the acquisition of Alexion which adds 2,500 headcount.

ESG data sourced from Sustainalytics

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.

This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Refinitiv. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.

Latest from Share research
Weekly newsletter
Sign up for editors choice. The week's top investment stories, free in your inbox every Saturday.
Written by
Derren Nathan
Derren Nathan
Head of Equity Research

Derren leads our Equity Research team with more than 15 years of experience in his field. Thriving in a passionate environment, Derren finds motivation in intellectual challenges and exploring diverse ideas within his writing.

Our content review process
The aim of Hargreaves Lansdown's financial content review process is to ensure accuracy, clarity, and comprehensiveness of all published materials
Article history
Published: 9th November 2023