Year-to-date and Q3 2021 results announcement

AstraZeneca PLC

12 November 2021 07:00 GMT

Year to date and Q3 2021 results

AstraZeneca reinforces its scientific leadership through exceptional

pipeline delivery and the addition of Alexion in the quarter

• Total Revenue in the year to date, including Alexion from 21 July 2021, was $25,406m, representing growth of 32% (28% at CER). Total Revenue in the third quarter increased by 50% (48% at CER) to $9,866m
• Excluding the pandemic COVID-19 vaccine, Total Revenue increased 21% (17% at CER) in the year to date to $23,187m, and by 34% (32% at CER) in the quarter to $8,816m
• Eight positive Phase III results since June, with potential to change standard of care in several diseases
• Alexion integration progressing well, creating new opportunities in rare diseases
• Operating Expenses in the quarter reflected the addition of Alexion, as well increased R&D expenses across multiple programs, investment in our COVID-19 medicines, and increased SG&A from pre-launch activities following successful pipeline delivery
• Earnings guidance for the full year is unchanged

In the year to date, AstraZeneca delivered double-digit revenue growth from its Oncology, CVRM1 and R&I2 medicines, and established its Rare Disease capability with the acquisition of Alexion Pharmaceuticals Inc. (Alexion). Rare disease is a high-growth area with rapid innovation and significant unmet medical need.

Since June, AstraZeneca has made significant progress with its late-stage pipeline, reporting eight positive Phase III trial results and the approval of Saphnelo (anifrolumab) in the US for the treatment of systemic lupus erythematosus, and Ultomiris in the EU for children and adolescents with paroxysmal nocturnal haemoglobinuria. Enhertu received a Breakthrough Therapy Designation from the US FDA3 following ground-breaking results from the DESTINY-Breast03 trial. The Company also announced positive results for Lynparza in prostate cancer, Imfinzi plus tremelimumab in liver cancer, Imfinzi in biliary tract cancer, PT027 in asthma, ALXN1840 in Wilson disease, and AZD7442 in COVID-19 prophylaxis and treatment.

Pascal Soriot, Chief Executive Officer, commented:

"AstraZeneca's scientific leadership continues to provide strong revenue growth and exceptional pipeline delivery, with eight positive late-stage readouts across seven medicines since June, including our long acting antibody combination showing promise in both prevention and treatment of COVID-19. The addition of Alexion furthers our commitment to bring transformative therapies to patients around the world, and I am proud of our colleagues' ongoing dedication and focus.

Our broad portfolio of medicines and diversified geographic exposure provides a robust platform for long-term sustainable growth. Following accelerated investment in upcoming launches after positive data flow, we expect a solid finish to the year and our earnings guidance is unchanged."

Table 1: Revenue and EPS summary
			YTD 2021			Q3 2021
			Actual % CER4 %		Actual %	CER %
		$m	Change	change	$m	Change	change
- Product Sales	25,043	33	29	9,741	49	47
- Collaboration Revenue		363	10	10	125	n/m	n/m
Total Revenue	25,406	32	28	9,866	50	48
- Less pandemic COVID-19 vaccine5		2,219	n/m6	n/m	1,050	n/m	n/m
Total Revenue ex-pandemic vaccine7		23,187	21	17	8,816	34	32
Reported8 EPS9		$0.33	(80)	(65)	$(1.10)	n/m	n/m
Core10 EPS		$3.59	22	23	$1.08	14	15
Impact of pandemic vaccine on EPS	$(0.03)	n/m	n/m	$0.01	n/m	n/m

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Key elements of Total Revenue performance in the year-to-date included:

• An increase in Product Sales of 33% (29% at CER) to $25,043m
• The first contribution from Rare Disease, which generated $1,311m of revenue in the period following completion of the Alexion acquisition on 21 July 2021
• Oncology growth of 19% (16% at CER) to $9,744m, CVRM growth of 14% (10% at CER) to $6,028m and R&I growth of 16% (12% at CER) to $4,456m
• An increase in Emerging Markets revenue of 33% (28% at CER) to $8,618m. In China, revenue increased 17% (8% CER) to $4,699m in the year to date and by 10% (2% CER) in the quarter. China revenues in the year to date were impacted by pricing pressure associated with NRDL11 and VBP12 programmes.
• Tagrisso's sequential quarterly performance in China was impacted by inventory phasing and stock compensation relating to NRDL changes in March. In future periods, volume growth from increased patient access is expected to compensate for the lower NRDL price
• Revenue in ex-China Emerging Markets increased 60% in the year to date to $3,919m. Excluding vaccine revenue of $1,139m, revenue in ex-China Emerging Markets increased by 13% in the year to date (14% at CER) to $2,780m and by 30% in the quarter to $1,018m, driven by Oncology medicines and Farxiga
• In the US, Total Revenue increased by 29% to $8,305m and in Europe by 40% (31% at CER) to $5,178m, including pandemic COVID-19 vaccine revenue of $736m

Guidance

The Company provides further details on its FY 2021 guidance at CER.

Total revenue excluding the COVID-19 vaccine is expected to grow by a low-twenties percentage, in line with prior guidance. Including vaccine revenues in Q4 2021, revenue is expected to grow by a mid-to-high twenties percentage.

Growth in Core EPS13 to $5.05 to $5.40, in line with prior guidance.

Prior guidance excluded the revenue and profit impact of sales of the pandemic vaccine. The Company is now expecting to progressively transition the vaccine to modest profitability as new orders are received. COVID-19 vaccine sales in Q4 2021 are expected to be a blend of the original pandemic agreements and new orders, with the large majority coming from pandemic agreements. The limited profit contribution from the vaccine in Q4 2021 is expected to offset costs relating to the Company's long acting antibody combination (AZD7442), resulting in no change to Core EPS guidance. Core Tax Rate guidance is unchanged at 18-22%.

In general, AstraZeneca continues to recognise the heightened risks and uncertainties from the effects of COVID-19. 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 October to December 2021 were to remain at the average of rates seen in the year to date, it is anticipated that there would be a low single-digit favourable impact on Total Revenue and an immaterial impact on Core EPS versus CER data. The Company's foreign-exchange rate sensitivity analysis is contained within the operating and financial review.

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Financial summary

• Variances across periods are based on a comparison of the Group's performance in the year to date and the quarter, including Alexion from 21 July 2021, with the Group's performance in the comparative prior periods, which do not include Alexion. Pro forma total revenue growth rates have been presented only for Q3 2021 Rare Disease and its constituent medicines, and do not impact any Group totals
• Total Revenue, comprising Product Sales and Collaboration Revenue, increased by 32% in the year to date (28% at CER) to $25,406m. Total Revenue included $2,219m from the pandemic COVID-19 vaccine
• Reported Gross Profit14 Margin in the year to date declined eleven percentage points to 68.8%; Core Gross Profit Margin declined six percentage points in the year to date to 74.1%, predominantly reflecting the equitable supply, at no profit to AstraZeneca, of the pandemic COVID-19 vaccine, together with an increasing impact from profit-sharing arrangements (primarily Lynparza and roxadustat) and the impact of the NRDL and VBP programmes in China. These effects were partially offset by the contribution of Alexion from 21 July 2021, a higher proportion of Oncology sales, and increasing patient access in China. Reported Gross Profit Margin was also impacted by $1,044m due to the unwind of the fair value adjustment to Alexion inventories at the date of acquisition. Variations in gross margin performance between periods can be expected to continue
• Reported Total Operating Expense increased in the year to date by 39% (34% at CER) to $17,591m. Core Total Operating Expense increased by 24% (20% at CER) to $13,649m and represented 54% of Total Revenue (YTD 2020: 57%)
• Reported R&D Expense increased in the year to date by 67% (63% at CER) to $7,152m including an impairment charge of $1,172m recognised in the quarter on an intangible asset related to the acquisition of Ardea Biosciences, Inc. in 2012, following the decision to discontinue the development of verinurad. Core R&D Expense increased in the year to date by 34% (30% at CER) to $5,591m with increases in both Reported and Core R&D Expense reflecting the Company's continued investment in its COVID-19 vaccine and AZD7442, investment in several late-stage Oncology trials and the advancement of a number of Phase II clinical development programmes in BioPharmaceuticals
• Reported SG&A Expense increased in the year to date by 25% (21% at CER) to $10,117m and includes the increased amortisation of intangible assets related to the Alexion acquisition. Core SG&A Expense increased by 19% (14% at CER) to $7,736m, reflecting the addition of Alexion SG&A expenses from 21 July 2021, investment in Oncology-medicine launches, the launch of several new BioPharmaceuticals medicines, particularly in the US, AstraZeneca's further expansion in Emerging Markets, and the existing infrastructure base in China
• Reported and Core Other Operating Income and Expense15 increased in the year to date by 51% (50% at CER) to $1,345m and $1,346m respectively, and included $776m income from the divestment of AstraZeneca's 26.7% share of Viela Bio, Inc. (Viela) in March 2021
• The Reported Operating Profit Margin declined fourteen percentage points (thirteen at CER) to 5.3%, reflecting the aforementioned intangible impairments and other factors. The Core Operating Profit Margin declined two percentage points (one percentage point at CER) in the year to date to 26.0% driven by the aforementioned increase in R&D and SG&A expenses
• Reported EPS in the year to date declined 80% (65% at CER) to $0.33. Core EPS increased by 22% (23% at CER) to $3.59. Reported and Core EPS were adversely affected by $0.03 due to the pandemic COVID-19 vaccine

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Table 2: Select Medicines Total Revenue performance

Further details of the individual medicine performances are provided in the Total Revenue section.

TagrissoOncology

Imfinzi

Lynparza

Calquence

Enhertu

FarxigaCVRM Brilinta

Bydureon roxadustat Lokelma

SymbicortR&I

Fasenra

Pulmicort

Breztri

Soliris16Rare

Ultomiris16Disease16

Strensiq16

PandemicCOVID-19 COVID-19 vaccine

	YTD 2021			Q3 2021
	Actual	CER		Actual	CER
$m	% change	% change	$m	% change	% change
3,701	17	13	1,247	8	7
1,778	20	17	618	16	15
1,719	21	18	588	27	25
843	n/m	n/m	354	n/m	n/m
147	n/m	n/m	57	n/m	n/m
2,156	57	51	797	51	48
1,124	(9)	(11)	375	(3)	(4)
293	(10)	(11)	95	(13)	(13)
148	n/m	n/m	56	n/m	n/m
122	n/m	n/m	49	n/m	n/m
2,047	-	(3)	676	13	11
901	35	32	322	34	33
714	14	7	217	44	36
130	n/m	n/m	47	n/m	n/m
798	n/m	n/m	798	(3)	(2)
297	n/m	n/m	297	31	31
159	n/m	n/m	159	7	8
2,219	n/m	n/m	1,050	n/m	n/m

Table 3: Regional Total Revenue performance

Further details of the regional performances are provided in the Regional Total Revenue section.

			YTD 2021			Q3 2021
			% of	Actual %	CER %		Actual %	CER %
		$m	total	change	change	$m	change	change
Emerging Markets	8,618	34	33	28	3,159	48	42
US	8,305	33	29	29	3,471	53	53
Europe	5,178	20	40	31	1,918	52	49
Established RoW		3,305	13	28	24	1,318	45	46
Total	25,406	100	32	28	9,866	50	48

Total Revenue from Emerging Markets increased 33% (28% CER) to $8,618m, of which $1,139m came from the pandemic COVID-19 vaccine. Excluding the COVID-19 vaccine, Total Revenue from Emerging Markets increased by 16% (10% at CER) in the year to date to $7,479m.

Corporate and business development

In 2019, Caelum Biosciences (Caelum) and Alexion entered into a collaboration to develop CAEL-101 for light chain amyloidosis, whereby Alexion acquired a minority equity interest and an exclusive option to acquire the remaining equity in Caelum. AstraZeneca has treated Caelum as a subsidiary from the date of acquisition of Alexion, reflecting a non-controlling interest of $150m. On 5 October 2021, the Group completed the acquisition of the remaining shares of Caelum and paid its shareholders the option exercise price of $150m, with the potential for additional payments of up to $350m upon achievement of regulatory and commercial milestones.

In November 2021, AstraZeneca agreed to transfer its global rights to Eklira, known as Tudorza in the US, and Duaklir to Covis Pharma Group for $270m payable on completion, which is expected in the fourth quarter of 2021. Covis Pharma Group will also cover certain ongoing development costs related to the medicines. The income arising from the upfront payment will be fully offset by a charge for derecognition of the associated intangible asset and therefore no Other Operating Income will be recognised in AstraZeneca's financial statements.

4

Sustainability summary

a) Access to healthcare

In the third quarter of 2021, the Company delivered approximately 67 million doses of its pandemic COVID-19 vaccine through COVAX17. As of 30 September 2021, the Company and its sublicensee Serum Institute of India Pvt. Ltd. (SII) have delivered more than 145 million doses with COVAX to over 125 countries, approximately half of all COVAX supply. The majority of the doses have gone to low and middle-income countries. Globally, AstraZeneca and its sub-licensing partners have released more than 1.5 billion vaccine doses as of the 30 September 2021, for supply in over 170 countries.

b) Environmental protection

On 3 November 2021, at the 26th UN Climate Change Conference (COP26), HRH The Prince of Wales named AstraZeneca as one of the first holders of the Terra Carta Seal, in recognition of the company's efforts to lead and accelerate action for a more sustainable future. In addition, Pascal Soriot was recognised as the Champion of the new Sustainable Markets Initiative (SMI) Health System Taskforce, which was launched at COP26 with HRH The Prince of Wales and with health systems leaders, with the shared ambition to accelerate the delivery of net zero, sustainable healthcare.

A more extensive sustainability update is provided laterin this announcement.

Notes

The following notes refer to pages one to five.

1. Cardiovascular, Renal & Metabolism
2. Respiratory & Immunology
3. US Food and Drug Administration
4. Constant exchange rates. These are financial measures that are not accounted for according to generally accepted accounting principles (GAAP) because they remove the effects of currency movements from Reported results.
5. The pandemic COVID-19 vaccine Total Revenue includes $83m of Collaboration Revenue of which $80m is receivable from the Serum Institute of India Pvt. Ltd. (SII) with an equivalent charge included within Other Operating Income and Expense in relation to consequent obligations under the license agreement with Oxford University Innovation (OUI).
6. Not meaningful.
7. Total Revenue ex-pandemicvaccine is a non-GAAP measure, which excludes the revenue impact from sales of the pandemic COVID-19 vaccine during the pandemic period to help facilitate a comparison to guidance.
8. Reported financial measures are the financial results presented in accordance with UK-adopted International Accounting Standards and EU-adopted International Financial Reporting Standards (IFRSs), and IFRS as issued by the International Accounting Standards Board (IASB).
9. Earnings per share.
10. Core financial measures. These are non-GAAP financial measures because, unlike Reported performance, they cannot be derived directly from the information in the Group's Financial Statements. See the Operating and financial reviewfor a definition of Core financial measures and a reconciliation of Core to Reported financial measures.
11. China's National Reimbursement Drug List.
12. Volume-basedprocurement.
13. The calculation of Core EPS for guidance is based on 1,418 million weighted average number of shares outstanding during 2021. The number of shares in issue as of the close of the Alexion acquisition was 1,549 million.
14. Gross Profit is defined as Total Revenue minus Cost of Sales. The calculation of Reported and Core Gross Profit Margin excludes the impact of Collaboration Revenue and any associated costs, thereby reflecting the underlying performance of Product Sales.
15. Where AstraZeneca does not retain a significant ongoing interest in medicines or potential new medicines, income from divestments is reported within Reported and Core Other Operating Income and Expense in the Company's financial statements.
16. Growth rates on Rare Disease medicines have been calculated on a pro forma basis by comparing post-acquisition revenues from 21 July 2021 with the corresponding prior year pre-acquisition Q3 revenues previously published by Alexion adjusted pro rata to match the post-acquisition period. Pro forma Total Revenue growth rates have been presented only for Q3 2021 Rare Disease area and constituent medicines, and do not impact any Group totals.
17. COVID-19Vaccines Global Access (COVAX) is a coalition co-led by CEPI, the Coalition for Epidemic Preparedness Innovations, Gavi, the Vaccine Alliance (Gavi), and the WHO. It is the only global initiative bringing governments and manufacturers together to ensure that safe and effective COVID-19 vaccines are available worldwide to both higher-income and lower-income countries.

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