AstraZeneca PLC
29 July 2022 07:00 GMT
H1 2022 results
Strong revenue performance and R&D success enables further investment in the pipeline and new launches
Revenue and EPS summary
- Product Sales
- Collaboration Revenue Total Revenue Reported2 EPS3 Core4 EPS
H1 2022 | Q2 2022 | ||||
% Change | % Change | ||||
$m | Actual | CER1 | $m | Actual | CER |
21,610 | 41 | 47 | 10,630 | 32 | 38 |
551 | n/m | n/m | 141 | (20) | (20) |
22,161 | 43 | 48 | 10,771 | 31 | 37 |
$0.48 | (70) | (66) | $0.23 | (45) | (46) |
$3.61 | 43 | 44 | $1.72 | 92 | 89 |
H1 2022 Financial performance (growth numbers and commentary at CER)
- Total Revenue increased 48% to $22,161m, with growth coming from all disease areas and from the addition of Alexion
- Total Revenue from Oncology increased 22%5, including receipt of a milestone payment. Product Sales from Oncology increased 18%. Total Revenue from R&I6 increased 3%, CVRM7 increased 19%8 and Rare Disease increased 10%8. Excluding a one-offhistorical pricing adjustment, Rare Disease increased 8%
- Core Gross Margin of 81%, with the second quarter benefitting from currency fluctuations, and phasing of COVID-19 medicine contracts
- Core Operating Margin of 33%. Core Total Operating Expense increased 33%, reflecting the addition of Alexion, and continued investment in new launches and the pipeline to build industry-leadingmid-to-long term growth
- Core EPS of $3.61, with the second quarter benefitting from a Core Tax Rate of 15%. The FY 2022 expectation for the Core Tax Rate remains 18-22%
- Interim dividend declared of $0.93 (76.4 pence, 9.49 SEK) per ordinary share, reflecting the Board's intent to increase to $2.90 in FY 2022, as announced at FY 2021
- FY 2022 Total Revenue guidance at CER increased due to an updated outlook for COVID-19 medicines and continued strong performance of the overall business, enabling further investment in the pipeline. With an expectation that Other Operating Income in H2 2022 will be similar to H1 2022, EPS guidance is unchanged
Key milestones achieved since the prior results
- Key data: Positive read-outs for Farxiga in HFpEF9 (DELIVER), Imfinzi in early NSCLC10 (AEGEAN), eplontersen in ATTRv-PN11 (NEURO-TTRansform) and Ultomiris in NMOSD12 (CHAMPION-NMOSD). Full results from the Enhertu DESTINY-Breast04 trial in HER213-low breast cancer, presented at ASCO
- Key approvals: Enhertu for HER2-positive breast cancer (DESTINY-Breast03) in the US and EU; positive CHMP14 opinions in the EU for Tezspire in severe asthma (NAVIGATOR), Lynparza15 in early breast cancer (OlympiA) and Ultomiris in gMG16 (CHAMPION-MG)
- Other regulatory milestones: US Priority Review for Imfinzi in biliary tract cancer (TOPAZ-1) and Enhertu in HER2-low metastatic breast cancer (DESTINY-Breast04), China Priority Review for Koselugo in NF1-PN17
Pascal Soriot, Chief Executive Officer, AstraZeneca, said:
"AstraZeneca had a strong financial first half of 2022, and great pipeline delivery. We announced practice- changing data for several medicines including Enhertu in breast cancer, Farxiga in heart failure and Ultomiris in neuromyelitis optica spectrum disorder.
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We have made great progress in our efforts to combat COVID-19. Vaxzevria is estimated to have saved more than six million lives during the first year of roll-out, and Evusheld has protected hundreds of thousands of immunocompromised people, enabling them to return to a more normal life. Evusheld continues to demonstrate activity against new variants.
Given the ongoing performance of our underlying business and the contribution of our COVID-19 medicines, we are updating our revenue guidance for 2022. This has enabled us to increase our R&D investment in the exciting number of pipeline opportunities that can benefit patients and drive long term sustainable growth for our company. We look forward to announcing the results of several important late-stage trials this year and next".
Guidance
The Company updates FY 2022 guidance due to strength in its overall business, an updated outlook for COVID-19 medicines, as well as increased investment in R&D to drive long term sustainable growth.
Total Revenue is expected to increase by a low twenties percentage (previously high teens)
Core EPS is expected to increase by a mid-to-high twenties percentage (unchanged)
- The CER growth rates include the full-year contribution of Vaxzevria in both FY 2021 and FY 2022
- Total Revenue from COVID-19 medicines is anticipated to be broadly flat versus FY 2021 (previously a low- to-mid twenties percentage decline), with growth in Evusheld offsetting an expected decline in Vaxzevria sales. The majority of Vaxzevria revenue in 2022 is expected to come from initial contracts
- As previously indicated, the Gross Margin from the COVID-19 medicines is expected to be lower than the Company average
- Core Operating Expenses are expected to increase by a mid-to-high teens percentage, driven in part by the full year integration of Alexion expenses. (Previous guidance was a low-to-mid teens percentage increase. The update is a result of increased R&D spend following positive trial readouts, and increased spend to support new launches, including Evusheld)
- Other Operating Income in H2 2022 is expected to be similar to the level seen in H1 2022
- Emerging Markets Total Revenue, including China, is expected to grow by a mid single-digit percentage in FY 2022 (unchanged). China Total Revenue is expected to decline by a mid single-digit percentage in FY 2022 (unchanged), primarily due to the continued NRDL18 and VBP19 programmes impacting various medicines. The Company remains confident in the longer-term outlook for Emerging Markets, driven by a large market opportunity, broader patient access and an increased mix of new medicines
- A Core Tax Rate between 18-22% (unchanged)
AstraZeneca continues to recognise and actively manage the heightened risks from COVID-19 and geopolitical and supply chain uncertainties on overall business performance. Variations in performance between quarters can be expected to continue.
The Company is unable to provide guidance on a Reported basis because AstraZeneca cannot reliably forecast material elements of the Reported result, including any fair value adjustments arising on acquisition-related liabilities, intangible asset impairment charges and legal settlement provisions. Please refer to the cautionary statements section regarding forward-looking statements at the end of this announcement.
Currency impact
If foreign-exchange rates for July to December 2022 were to remain at the spot rates seen on 30 June 2022, it is anticipated that FY 2022 Total Revenue would incur a mid single-digit adverse impact (previously a low single- digit adverse impact) versus the financials at CER, and, as previously indicated, FY 2022 Core EPS would incur a mid-single-digit adverse impact.
The Company's foreign-exchange rate sensitivity analysis is contained in Table 18.
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Table 1: Key elements of Total Revenue performance in Q2 2022
Revenue type
Product Sales Collaboration Revenue
Total Revenue
Disease areas
Oncology
CVRM8
R&I
V&I20
Rare Disease8
Other Medicines
Total Revenue
Regions inc. Vaxzevria
Emerging Markets
- China
-
Ex-ChinaEmerging Markets
US Europe Established RoW
Total Revenue inc. Vaxzevria
Regions exc. Vaxzevria
Emerging Markets
- China
-
Ex-ChinaEmerging Markets
US Europe Established RoW
Total Revenue exc. Vaxzevria
% Change | |||
$m | Actual | CER | |
10,630 | 32 | 38 | $1,776m from medicines acquired with Alexion |
141 | (20) | (20) | $100m for Enhertu (Q2 2021: $46m) |
$13m for Tezspire (Q2 2021: $nil) | |||
10,771 | 31 | 37 | |
$m | Actual | CER | |
3,810 | 15 | 20 | Good performance across key medicines and |
regions, despite lower diagnosis rates and | |||
adverse impact in China from COVID-19-related | |||
lockdowns | |||
2,356 | 14 | 19 | Farxiga achieved another blockbuster quarter with |
$1,104m in revenues in the quarter | |||
1,395 | (2) | 1 | Growth across Breztri and Fasenra offsetting a |
decline in Pulmicort of 30% (28% at CER) | |||
primarily due to the impact of VBP | |||
implementation and COVID-19 lockdowns in | |||
China | |||
981 | 7 | 12 | $455m from Vaxzevria21, $445m from Evusheld |
Majority of Vaxzevria revenue from initial | |||
contracts | |||
1,801 | 6 | 12 | Durable C5 franchise growth, including continued |
conversion to Ultomiris in PNH and aHUS and | |||
launch in gMG in the US | |||
Excluding a one-off historic pricing adjustment in | |||
Q2 that benefitted ex-US Total Revenue, Rare | |||
Disease pro forma revenue growth would have | |||
been 2% (8% at CER) | |||
427 | (17) | (10) | |
10,771 | 31 | 37 |
$m | Actual | CER |
2,792 | (3) | 1 |
1,435 | (6) | (5) Pricing pressure associated with the NRDL and |
VBP programmes | ||
COVID-19-related lockdowns | ||
1,357 | 1 | 7 |
4,348 | 72 | 72 |
2,080 | 21 | 35 |
1,550 | 39 | 55 |
10,771 | 31 | 37 |
$m | Actual | CER | Contribution of medicines acquired with Alexion |
2,603 | 7 | 11 | $81m |
1,435 | (6) | (5) | |
1,167 | 31 | 39 | $81m |
4,348 | 72 | 72 | $1,041m |
1,952 | 43 | 59 | $377m |
1,412 | 39 | 56 | $277m |
10,316 | 41 | 47 | $1,776m |
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Table 2: Key elements of financial performance in Q2 2022
Metric | Reported | Reported | Core | Core |
($m or %) | change | change | ||
Total | $10,771m | 31% Actual | $10,771m | 31% Actual |
Revenue | 37% CER | 37% CER | ||
Gross | 72% | (1pp) Actual | 83% | 10% Actual |
Margin23 | (2pp) CER | 8% CER | ||
R&D | $2,546m | 39% Actual | $2,431m | 35% Actual |
Expense | 44% CER | 40% CER | ||
SG&A | $4,681m | 51% Actual | $3,137m | 27% Actual |
Expense | 56% CER | 33% CER | ||
Other | (5%) Actual | (12%) Actual | ||
Operating | $122m | $112m | ||
(5%) CER | (13%) CER | |||
Income24 | ||||
Operating | 5% | (9pp) Actual | 31% | 9% Actual |
Margin | (9pp) CER | 8% CER | ||
Net Finance | $293m | (8%) Actual | $223m | 1% Actual |
Expense | 10% CER | 26% CER | ||
Tax Rate | (46%) | n/m | 15% | (8%) Actual |
(9%) CER | ||||
EPS | $0.23 | (45%) Actual | $1.72 | 92% Actual |
(46%) CER | 89% CER | |||
Comments22
- See Table 1 and the Total Revenue section of this document for further details
- Addition of Alexion
- Increasing mix of Oncology sales
- Positive effect from phasing of COVID-19 contracts
- Positive impact from currency fluctuations ‒ China impact of NRDL and VBP
‒ Impact from profit-sharing arrangements (e.g. Lynparza)
‒ Reported Gross Margin impacted by unwind of Alexion inventory fair value adjustment
Foreign exchange fluctuations may have a positive or negative impact on Gross Margin in future quarters
- Addition of Alexion
- Increased investment in the pipeline following un-gating of additional late-stage trials
- One-off$89m impairment (included in Reported and Core) of a pre-paid asset relating to a discontinued collaboration with an external partner
- Reversal of the beneficial cost phasing effects seen in Q1 2022
- Core R&D-to-Total Revenue ratio of 23% (Q2 2021: 22%)
- Addition of Alexion
- Market development activities for recent launches, including Evusheld
- Core SG&A-to-Total Revenue ratio of 29% (Q2 2021: 30%)
- Includes $61m divestment from Plendil, and income coming from royalties and prior transactions
- See Gross Margin and Expenses commentary above
+ Alexion debt financing costs
- Reported impacted by lower discount unwind on acquisition-related liabilities
- 15% tax rate in the quarter reflected geographical mix of profits and favourable adjustments to prior year tax liabilities in a number of major jurisdictions
- Variations in the tax rate can be expected to continue quarter to quarter
- Full year expectation remains 18-22%
- Further details of differences between Reported and Core are shown in Table 13
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Corporate and business development
In May 2022, AstraZeneca entered into a licence agreement with RQ Biotechnologies Ltd for a portfolio of early- stage mAbs25 targeted against SARS-CoV-2, the virus that causes COVID-19. Under the agreement, AstraZeneca acquired an exclusive worldwide licence to develop, manufacture and commercialise mAbs against SARS-CoV-2.
Also in May, AstraZeneca completed the sale of commercial rights to Plendil in 35 markets globally, resulting in a $61m gain being recognised in Other Operating Income in the quarter.
In June 2022, the Company entered into a broad strategic collaboration with GRAIL, LLC to develop and commercialise companion diagnostic assays for use with AstraZeneca's therapies. The collaboration will initially focus on developing companion diagnostic tests to identify patients with high-risk,early-stage disease, with plans to embark on numerous trials across multiple indications over the next several years. The deal also encompasses the use of GRAIL's technology to enable recruitment of patients with early-stage cancer for AstraZeneca's clinical trials.
In July 2022, AstraZeneca announced an agreement to acquire TeneoTwo, Inc., including its Phase I clinical- stage CD19xCD3 T-cell engager, TNB-486,currently under evaluation in relapsed and refractory B-cellnon- Hodgkin lymphoma. AstraZeneca will acquire all outstanding equity of TeneoTwo in exchange for an upfront payment of $100m on deal closing. Under the terms of the agreement, AstraZeneca will make additional contingent R&D-related milestone payments of up to $805m and additional contingent commercial-related milestone payments of up to $360m to TeneoTwo's equity holders. The transaction is expected to close in the third quarter of 2022.
Sustainability summary
Airfinity, an independent provider of global real-time health intelligence, estimates that the AstraZeneca COVID- 19 vaccine saved over six million lives during the period 8 December 2020 to 8 December 2021. This analysis is based on data from Imperial College, London, published in The Lancetin June 2022.
Management changes
AstraZeneca PLC today announced the appointment of Michel Demaré as the Chair-designate of the Board. His appointment followed a robust succession planning process led by Philip Broadley in his capacity as senior independent Non-Executive Director.
As previously communicated, Leif Johansson, current Chair of the Board of AstraZeneca will be retiring at the conclusion of the Company's Annual General Meeting in April 2023. Michel's appointment is effective immediately thereafter allowing for a managed handover period over the coming months.
Michel was appointed to the Board of AstraZeneca in September 2019 as an independent Non-Executive Director and is currently Chair of the Company's Remuneration Committee and member of the Audit Committee and the Nomination and Governance Committee. He is a Non-Executive Director of Vodafone Group Plc and Louis Dreyfus Int'l Holdings BV. He is also Chairman of IMD Business School and Chairman of Nomoko AG.
Conference call
A conference call and webcast for investors and analysts will begin today, 29 July 2022, at 11:45 BST. Details can be accessed via astrazeneca.com.
Reporting calendar
The Company intends to publish its year-to-date and third quarter results on Thursday 10 November 2022.
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AstraZeneca plc published this content on 29 July 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 July 2022 06:13:09 UTC.