AstraZeneca Plc – Full-year 2020 results

AstraZeneca Plc

Full-year 2020 results

Accelerating the scientific and commercial evolution; 2021 guidance shows continuing progress

AstraZeneca delivered strong results in the year, in line with guidance that was reconfirmed during the year. With over half of Total Revenue coming from the fast-growing new medicines¹, the Company leveraged its revenue growth to make further progress in profitability, while the strategy of sustainable growth through innovation brought numerous further benefits for patients. AstraZeneca's patient-centric strategy, focus on innovation and capital-allocation priorities remain unchanged, with sustainable long-term growth in revenue, profit and cash generation set to continue.

Pascal Soriot, Chief Executive Officer, commented:

“The performance last year marked a significant step forward for AstraZeneca. Despite the significant impact from the pandemic, we delivered double-digit revenue growth to leverage improved profitability and cash generation. The consistent achievements in the pipeline, the accelerating performance of our business and the progress of the COVID-19 vaccine demonstrated what we can achieve, while the proposed acquisition of Alexion is intended to accelerate our scientific and commercial evolution even further.

Additional investment in new medicines continued to fuel our rapidly growing oncology and biopharmaceuticals therapy areas. Tagrisso's future was enhanced with its first regulatory approval in early, potentially-curable lung cancer and further national reimbursement in China in advanced disease. Farxiga again expanded its potential beyond diabetes, while tezepelumab promised real hope for patients suffering from severe asthma. Thanks to the focus on an industry-leading pipeline and consistent execution, I am confident that we will continue to deliver more progress for patients and sustained, compelling results.

Table 1: Financial summary

Highlights of Total Revenue in the year included:

An increase in Product Sales of 10% (11% at CER) to $25,890m. The quarter was the first for many years with Product Sales in excess of $7,000m. New-medicine Total Revenue improved by 33% in the year to $13,950m, including growth in Emerging Markets of 53% (59% at CER) to $2,845m. Globally, the new medicines represented 52% of Total Revenue (FY 2019: 43%)

Oncology growth of 23% (24% at CER) to $11,455m, while New CVRM⁷ increased by 7% (9% at CER) to $4,702m. Respiratory & Immunology declined by 1% (stable at CER) to $5,375m, a reflection of the impact in China of COVID-19

An increase in Emerging Markets of 7% (10% at CER) to $8,711m, with China growth of 10% (11% at CER) to $5,375m. In the US, Total Revenue increased by 13% to $8,833m and in Europe by 10% (9% at CER) to $5,540m. Both regions delivered stronger growth rates in the final quarter compared to the full year – see the Regional Total Revenue section for details

Guidance

The Company provides guidance for FY 2021 at CER.

Total Revenue is expected to increase by a low-teens percentage,
accompanied by faster growth in Core EPS to $4.75 to $5.00.

The guidance does not incorporate any revenue or profit impact from sales of COVID-19 Vaccine AstraZeneca (C19VAZ). The Company intends to report these sales separately from the next quarter. Similarly, the guidance excludes the proposed acquisition by the Company of Alexion Pharmaceuticals, Inc. (Alexion), anticipated to close in Q3 2021. AstraZeneca recognises the heightened risks and uncertainties from the impact of COVID-19. Variations in performance between quarters can be expected to continue.

The Company is unable to provide guidance and indications 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.

Indications

The Company provides indications for FY 2021 at CER:

–  AstraZeneca continues its focus on improving operating leverage, while addressing its most important capital-allocation priority of re-investment in the business, namely continued investment in R&D and the support of medicines and patient access in key markets

–  A Core Tax Rate of 18-22%. Variations in the Core Tax Rate between quarters are anticipated to continue

Currency impact

If foreign-exchange rates for January 2021 were seen over the full year, it is anticipated that there would be a low single-digit favourable impact on Total Revenue and Core EPS. The Company's foreign-exchange rate sensitivity analysis is contained within the operating and financial review.

Financial summary

–  Total Revenue, comprising Product Sales and Collaboration Revenue, increased by 9% in the year (10% at CER) to $26,617m. Product Sales grew by 10% (11% at CER) to $25,890m, driven primarily by the performances of the new medicines across Oncology and BioPharmaceuticals, including Tagrisso and Farxiga. Total Revenue included $2m of C19VAZ Product Sales within Other medicines; from the next quarter, AstraZeneca intends to report the C19VAZ sales performance separately

–  The Reported Gross Profit⁸ Margin was stable (up by one percentage point at CER) at 80%, while the Core Gross Profit Margin was stable, also at 80%, in line with the Company's expectations

–  Reported Total Operating Expense declined by 2% in the year to $17,684m and represented 66% of Total Revenue (FY 2019: 74%). Core Total Operating Expense increased by 6% to $15,633m and comprised 59% of Total Revenue (FY 2019: 60%)

–  Reported R&D Expense declined by 1% in the year to $5,991m, primarily reflecting the comparative effect of the $533m impairment of Epanova in FY 2019. Core R&D Expense increased by 10% to $5,872m, representing 22% of Total Revenue (FY 2019: 22%). The increases partly reflected investment in the Oncology pipeline, including the development of datopotamab deruxtecan (DS-1062), and the ending in FY 2019 of the release of the upfront funding of Lynparza development, as part of the collaboration with MSD⁹

–  Reported SG&A Expense declined by 3% in the year to $11,294m; Core SG&A Expense increased by 3% (4% at CER) to $9,362m, representing 35% of Total Revenue (FY 2019: 37%). The difference in the movements partly reflected fair-value adjustments arising on acquisition-related liabilities, as well as an increase in legal provisions recognised in 2019

–  Reported Other Income and Expense declined by 1% in the year to $1,528m. Core Other Income and Expense fell by 2% to $1,531m

–  The Reported Operating Profit Margin increased by seven percentage points in the year (eight at CER) to 19%. The Core Operating Profit Margin increased by one percentage point (two at CER) to 28% and AstraZeneca anticipates further sustainable expansion in the Core Operating Profit Margin over time

–  Reported EPS of $2.44 in the year represented an increase of 137% (142% at CER). Core EPS grew by 15% (18% at CER) to $4.02

–  The Board has reaffirmed its commitment to the progressive dividend policy. A stable second interim dividend of $1.90 per share has been declared, keeping the unchanged full-year dividend per share at $2.80

–  Net Cash Inflow from Operating Activities of $4,799m in the year, a year-on-year increase of $1,830m, primarily reflected an underlying improvement in business performance and declines in Working Capital and Short-Term Provisions. EBITDA progression continued, with growth of 24% (27% at CER) in the year to $8,311m, while Net Debt of $12,110m represented an increase of $206m