All You Need To Know About AstraZeneca Plc (AZN)

OverviewÂ

AstraZeneca PLC (Ticker Symbol: AZN) is a British pharmaceutical company. It was established on April 1999 after the merger of Astra AB and Zeneca PL; headquartered at Cambridge, United Kingdom. The company is listed on London, New York and Stockholm exchanges, with the symbol AZN used in all the markets. The company has operations all over the world with business in over 100 countries, and its medicines are consumed by millions of patients across the globe. The company core team works with the world’s leading academic, biotech research institutions and have a clinical collaboration with Immunomedics.

The position of Chairman of the Board is held by Leif Johansson, who has been a member of the Board since April 2012 and became the Chairman in June 2012. Pascal Soriot has been handed the responsibility of the Executive Director and the Chief Executive Officer of the company, he been a member of the Board and CEO since 2012. Pascal joined the industry in 1986 and has worked in various roles since. Marc Dunoyer was appointed the Chief Financial Officer on November 2013.

Product Segments

AstraZeneca is a global, science-led biopharmaceutical company, focusing on discovering, developing, manufacturing and commercialising prescription medicines. Three core products segments are- Oncology, Cardiovascular & Metabolic Disease (CVMD) and Respiratory – and selectively pursue therapies in autoimmunity, neuroscience and infection.

The company’s Oncology division aims at expanding the treatment options for tumours and haematological cancers, using four key scientific platforms: Immuno-oncology (IO), Tumour drivers and resistance mechanisms, DNA damage response and Antibody-drug conjugates (ADC). In the Cardiovascular & Metabolic Disease (CVMD) segment, the company is expanding its portfolio into the cardiovascular-renal area and has more than 25 potential medicines and medicine combinations in its pipeline.

Geographical Segments

The company’s geographic segments are grouped into the US, Emerging Markets, Europe and Established Rest of the World. Emerging Markets constitutes the most significant proportion of sales with 33 per cent, with China being the largest market, increasing by 28 per cent in 2018.

Key Financial Metrics

(FY 2018, figures in USD million)

(Source: Company Fillings)

Segment Reporting

(Source: Company Fillings)

Key Financial Highlights (FY 2018)

• In the year 2018, product sales increased by 4 per cent to $21,049 million, reflecting the strong performance of new medicines, which generated an incremental sale of $2.8 billion at CER.
• Total revenue decreased by 2 per cent to $22,090 million, primarily because of a 55 per cent decline in externalisation revenue.
• Reported gross margin decreased by 3 per cent to 77% in the year, and core gross margin fell by 2% to 80%.
• Total reported operating expenses of $16,294 million remained stable but core expenses grew by 5 per cent to $14,248 million.
• For the year 2018, capital expenditure decreased to $1,043 million from $1,326 million in FY 2017.
• Reported EPS declined by 28 per cent over the last year to $1.70, and Core EPS dropped by 19 per cent to $3.46. Decreased EPS reflects a decline in the top-line numbers.
• A second interim dividend of $1.90 per share was declared, increasing the dividend announced for 2018 to $2.8 per share.
• In 2018, Oncology sales increased by 50 per cent in 2018 to $6,028 million. Sales of Tagrisso increased by 95 per cent to $1,860 million, Imfinzi grew to $633 million from $19 million a year ago, and Lynparza grew to $647 million, increasing by 118 per cent.
• CVRM sales grew by 12 per cent over the year to $4,004 million. Farxiga grew to $1,391 million, representing a growth of 30%; sales for Bydureon was $584 million, an increase of 2%; and Brilinta grew by 22 per cent to $1,321 million.
• Respiratory sales grew by 4 per cent over the year to $4,911 million. Sales for Symbicort declined by 9% to $2,561 million; Pulmicort registered a growth of 9% to $1,286 million, and Fasenra reported sales of $297 million.

Key Ratios

(Source: Thomson Reuters)

• The reported gross margin in 2018, decreased by 2.4 per cent to 79.6 per cent from 81.6 per cent a year ago.
• The company has consistently performed above the industry median in 2018, reflecting stronger margins.
• The company is highly leveraged as compared to its peer group.

Share Price Performance

(Source: London Stock Exchange)

On 13^th February 2019, AZN share closed at GBp 5,721. Stock's 52 weeks High and Low is GBp 6,432.48 / GBp 4,699. At the closing price, the stock was trading 11.06% lower than its 52w High and 21.75% higher than its 52w low. From a technical standpoint, the stock was trading above its 200 and 30 days’ simple moving average (SMA) but was below its 60 days’ level. From valuation front, the stock was trading at a PE of 43.20x.

Outlook

• The company has provided a guidance for the year 2019: it expects a high single-digit percentage sales increase and core EPS of $3.50-$3.70 has been provided.
• Recent organisational changes are expected to improve speed and efficiency.
• There are 149 projects in the pipeline, with 8 new molecular entities in late-stage pipeline.
• The company’s focus on Emerging Markets, especially China and other leading markets, such as Russia and Brazil, is bearing fruits as the market has become the biggest segment on a product sales basis.
• The company faces significant pressure from regulator changes with the threat of price controls increasing across all markets.
• A sustained global economic slowdown may further accentuate pressure from governments and regulators on prices, leading to a decline in some markets.
• The uncertainty regarding Brexit is expected to increase volatility and may have an economic impact on some major markets.