AstraZeneca’s third quarter revenue grew by 10% to $15.2bn, when ignoring exchange rates, driven by broad-based growth across therapy areas and geographies.
Underlying operating profit for the quarter rose 13% to $5.0bn, while R&D expenditure increased 14% to $3.6bn, reflecting continued investment in late-stage trials and new technologies.
Over the first nine months, there were 16 positive Phase III readouts and 31 approvals in major regions.
Free cash flow year-to-date was $10.5bn and net debt stood at $24.0bn at the end of September.
Full-year 2025 guidance remains unchanged, with revenue growth expected in the high single digits, and underlying EPS growth in the low double digits.
The shares remained flat in midday trading.
Our view
AstraZeneca’s third-quarter results came in comfortably ahead of expectations but lack of an upgrade kept a lid on investor enthusiasm on the day. Some product lines suffered from the emergence of generic competition. We still think there’s a chance for the full year outcome to land a little better than guidance.
Reaching its $80bn annual revenue target and a mid-thirties operating margin by 2030 won’t be without challenges. But there’s a strong outlook for existing medicines as well as the pipeline of potential new products, an area where Astra's hit rate in the clinic has been impressive.
Cancer treatments are a cornerstone of Astra's offering. The diverse late-stage pipeline means there are lots of potential shots on goal as it pioneers technologies with the potential to replace existing treatment regimes.
But Astra’s biggest selling drug is Farxiga, which treats cardiovascular disease, kidney problems, and type 2 diabetes. Next year’s US patent expiry for Farxiga is a risk to be wary of, but clinical efforts to prove the benefits of combinations with other pipeline candidates have the potential to drive further sales growth.
Net debt sits at about 1.2x forecasted cash profits which doesn't look too demanding. 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 helps support a prospective dividend yield of around 2.1% - though no returns are guaranteed.
The valuation is below the long-term average, reflecting concerns around tariffs and the potential for more draconian action on drug pricing in the United States. The group’s been proactive on both fronts and we think tariff risk is manageable.
As for Donald Trump’s proposal to implement ‘Most Favoured Nation’ pricing, AstraZeneca has been quick to strike a deal with the President. While the details have not been disclosed, the company feels well placed to absorb the impact. Given its wide spread of markets, we’re inclined to agree.
We’re optimistic about the outlook for this prolific drug developer, but the valuation now looks to have caught up with forecasts. The company’s rich pipeline has the potential to drive better than guided growth over the medium term, but clinical trials come with a significant risk of failure meaning there’s also some downside risk.
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. However, ongoing investigations into employee activities in China should be closely followed. 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.
AstraZeneca key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. 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 LSEG. 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.
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