AstraZeneca: Most Promising Pharmaceutical Company During a Recession (NASDAQ: AZN)

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Roland Magnusson

On November 10, 2022, AstraZeneca (NASDAQ:NASDAQ:AZN), one of the latest among the major pharmaceutical companies, will publish its financial report for the third quarter of 2022. Announcing results in the second week of November is standard practice for a company and, therefore, it is the first indication that extraordinary earnings or net income data are not expected to be announced, as companies with unusually good or poor results try to publish with a deviation of 5 to 7 days from usual. In recent quarters, sales of medicines and vaccines have not only grown quarter on quarter, but have also exceeded analysts’ expectations, which is the first sign of an effective business model built under the leadership of Pascal Soriot.

Source: Author's elaboration, based on Investing.com

Source: Author’s elaboration, based on Investing.com

Several factors, including sales of approved drugs, expansion of indications, the development of new-generation product candidates capable of capturing significant market share, and the percentage of successful clinical trials and drug approvals without obtaining a CRL, had a significant impact. essential impact on development. of the company’s financial position not only in the third quarter of 2022, but will continue to affect the growth prospects of AstraZeneca’s key long-term financials. This article will provide an analysis of the most important things about AstraZeneca’s business that stock market participants should consider.

AstraZeneca Approved Drug Portfolio

AstraZeneca’s focus is on five key therapeutic areas, namely oncology, cardiovascular, renal and metabolic diseases (CVRM), respiratory and immunology (R&I), vaccines and immunological therapies (V&I) and rare diseases, which together generated $10,771 million in the second trimester. of 2022 and thus showing an increase of 31% compared to the previous year.

Source: Author's elaboration based on a quarterly securities report

Source: Author’s elaboration based on a quarterly securities report

Of these, the largest contribution to AstraZeneca’s revenue is made by medicines aimed at fighting cancer and HRQoL diseases. Therefore, I think they have priority status for analysis before the release of the quarterly report.

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Successes of the division of AstraZeneca focused on cancer treatment

AstraZeneca’s industry-leading oncology portfolio generated $3.701 billion in the second quarter of 2022, representing 34.8% of the company’s total revenue, while their combined sales increased year-on-year of 20%.

Source: Author's elaboration based on quarterly securities reports

Source: Author’s elaboration based on quarterly securities reports

Although three drugs showed both year-over-year and year-over-year sales declines, another five drugs with a combined 88.5% share of the oncology division’s total revenue continued to gain market share strongly in the quarter. Lynparza is one such drug approved for multiple types of cancer and generated $673 million in the second quarter of 2022, up 14.5% year over year. The main reason contributing to the rapid increase in sales volumes is the status of the first PARP inhibitor to enter the market.

Therefore, AstraZeneca’s management is still gaining an advantage by capturing a larger market share compared to other pharmaceutical companies. Furthermore, Lynparza remained the only PARP inhibitor for two years until 2017 and thus became the standard treatment for many types of cancer at a fast pace. Ultimately, these advantages translate into stronger sales dynamics relative to competitors, which are GSK’s Zejula (NYSE:GSK), Clovis Oncology’s Rubraca (NASDAQ:CLVS) and Pfizer’s Talzenna (NYSE:PFE).

For example, Zejula sales were £120m in the third quarter of 2022, showing no quarter-on-quarter increase, which increases the likelihood that Lynparza sales will maintain positive momentum not only in the short term but also into the future. the loss of exclusivity in 2026. Other The factor that indirectly indicates continued high demand for Lynparza is that of Merck (NYSE:MRK) Quarterly report for the third quarter of 2022in which the company reported that the alliance’s income from this drug was $284 million, 15.4% more than the previous year.

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Source: Author's elaboration based on quarterly securities reports

Source: Author’s elaboration based on quarterly securities reports

Over the last seven months, Lynparza has continued to expand its indications more actively than its competitors. From the end of the first quarter of 2022 to today, AstraZeneca has received three drug approvals in major markets. As a consequence, this increases the potential number of patients who may consider Lynparza as a treatment option and end up generating hundreds of millions of additional dollars relative to current values. At the time, GSK’s drug had not received any approvals in the same time period, and Clovis Oncology withdrew Rubraca’s approval altogether in Europe and the U.S for BRCA-mutated ovarian cancer.

Source: Author's elaboration based on quarterly securities reports

Source: Author’s elaboration based on quarterly securities reports

AstraZeneca medicines targeting HRQoL diseases

The company has a broad portfolio of medicines targeting cardiovascular, kidney and metabolic diseases that collectively affect hundreds of millions of people around the world. AstraZeneca’s already approved drug and product candidates can not only stop the progression of the disease but also cure it, thus reducing the global burden of HRQOL diseases on the health system and people.

Source: AstraZeneca

Source: AstraZeneca

This segment generated $2.352 billion for AstraZeneca in the second quarter of 2022, representing 22.1% of the company’s total revenue, while its combined sales increased 16.3% year-over-year.

Source: Author's elaboration based on quarterly securities reports

Source: Author’s elaboration based on quarterly securities reports

The sales dynamics of the segment that deals with the commercialization of drugs for the treatment of CVRM diseases showed a similar dynamic in relation to the oncology segment. On a positive note, only Seloken posted both quarterly and year-on-year sales declines, while four other drugs with a combined 63.2% share of the division’s total revenue achieved tangible positive results. As the industry’s best-selling drug, Farxiga generated $1.103 billion in sales for AstraZeneca in the second quarter of 2022, up 50.7% from a year earlier.

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Source: Author's elaboration based on quarterly securities reports

Source: Author’s elaboration based on quarterly securities reports

A significant increase in sales was due not only to the high performance of this drug relative to competitors, but also to the rapid increase in brand share among SGLT2 inhibitors and the ability of the company’s sales department to promote Farxiga to millions of patients suffering from diseases. such as type 2 diabetes, heart failure, and kidney disease. I believe in maintaining the current sales rate of this drug in the medium term due to the expansion of its use in therapeutic areas with unmet medical needs and the publication of new data from clinical trials during the last year.

Source: Author's elaboration, based on AstraZeneca press releases

Source: Author’s elaboration, based on AstraZeneca press releases

I estimate that Farxiga’s peak sales will be $8.4 billion by 2026, $5.4 billion more than in 2021. As a result, this drug will remain a source of revenue for a long time and will allow company management to reinvest hundreds of millions of dollars to rejuvenate AstraZeneca’s product portfolio and adopt a more aggressive mergers and acquisitions policy.

conclusion

In the first three quarters of 2022, AstraZeneca achieved impressive results in terms of successful clinical trials and drug approvals that could dramatically improve the quality of life for millions of patients. Furthermore, in the last six quarterly reports, the company’s management has confirmed the effectiveness of its innovative business model through year-over-year growth in revenue and net profit. In the second half of 2022, regulatory authorities in the US and Europe approved Enhertu for patients with metastatic breast cancer based on phase III clinical trials, which demonstrated a significant clinical advantage of this drug compared to competitors.

In my opinion, Enhertu’s mechanism of action and the extensive clinical development program developed in partnership with Daiichi Sankyo will increase the number of indications in a relatively short period of time and also exceed the EBITDA margin relative to the pharmaceutical industry giants. as Bristol-Myers Squibb (NEW YORK STOCK EXCHANGE:BMY), Novartis (NYSE:NVS) and Eli Lilly (NYSE:LLY). I believe AstraZeneca will continue its trend of beating Wall Street analysts’ expectations and retaining high investment interest from funds looking for promising assets that can outperform the S&P 500 (NYSEARCA:SPY) at a time of deteriorating macroeconomic conditions. .

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