AZ says recovery to continue to despite patent expiry and Brexit headwinds

AstraZeneca has upped its revenue expectations following a strong second quarter, saying that sales of newer drugs will offset a major patent expiry and the impact of Brexit.

Under the leadership of CEO Pascal Soriot the company has spent the last few years rebuilding its pipeline, selling off old drugs, and bringing new drugs to market as patents expired on former blockbusters such as Crestor and Nexium.

In a conference call Soriot said that the company has now enjoyed four successive quarters of sales growth, with revenues above market expectations.

Product sales in the three months ended June 30 increased 19% to $5.72 billion in constant currency, and Soriot highlighted a turnaround in sales in Europe where national health systems are beginning to reimburse AZ’s next generation of drugs.

Reported operating profit was down 35% compared with last year’s Q2 to $493 million as the company continues to invest in new drugs.

Nevertheless AZ now expects full year product sales to increase by a low double digit, up from the previous forecast of high single-digit percentage growth.

In a conference call with journalists Soriot had a typically upbeat message – there are a slew of data readouts that could translate into increased sales for products as the year progresses.

The company’s cancer immunotherapy Imfinzi (durvalumab) is also shaping up to become a billion dollar a year drug as countries outside the US begin to fund it.

This follows the success seen with AZ’s lung cancer drug Tagrisso which has helped to revive the company’s fortunes over the last few years.

Pascal Soriot Astra Zeneca

Pascal Soriot

Soriot said: “We are just getting started in markets outside the United States as reimbursement starts to come on board.”

The company now has five products that could become blockbusters by the end of the year, said Soriot, and 10 products that have the potential to become blockbusters over the next few years.

Brexit and Faslodex

But there are headwinds: GlaxoSmithKline’s PARP inhibitor drug has just produced results showing it improved survival in an “all comers” population with ovarian cancer.

This could be a source of competition to AZ’s Lynparza, which has only really produced results in a small group of patients with a BRCA mutation.

AZ countered this by noting that it hopes a combination of Lynparza and Roche’s Avastin cancer drug will produce an effect in a wider population of ovarian cancer patients.

The company expects a first readout of the PAOLA-1 study later this year, which will give an indication as to whether this approach works.

There is also a sizable patent expiry that will affect sales in the coming year – the oncology drug Faslodex is a blockbuster generating first-half sales in excess of half a billion dollars and generic competition began to kick in at the beginning of May and end of June.

The expectation is that the increasing sales from new drugs will offset this decline, although Soriot also added that pricing issues in China may also begin to weigh on growth.

Responding to a question on the political uncertainty as the UK edges towards Brexit under the leadership of new prime minister Boris Johnson, Soriot reiterated his message that the company has planned for all scenarios including a hard Brexit.

Nevertheless an “orderly” exit from the EU is a preferred option, said Soriot, who said that maintaining a supply of medicines for patients remains the company’s main goal.

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