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AstraZeneca Plc - H1 2019 Results

H1 2019 Results

Continuing strong top-line performance underpins confidence in sustainable growth


First-half Product Sales growth of 12% (17% at CER1) to $11,183m included an acceleration in second-quarter Product Sales to $5,718m (+14%, +19% at CER). The second quarter saw every sales region and all three therapy areas deliver an encouraging performance, including:


-       The sustained performance of new medicines2 (+66%, +72% at CER) to $2,385m


-       Sales growth by therapy area in the quarter: Oncology +51% (+57% at CER) to $2,167m, New CVRM3 +9% (+13% at CER) to $1,061m and Respiratory +2% (+7% at CER) to $1,252m


-       Sales growth by region in the quarter: total Emerging Markets sales grew by 17% (27% at CER) to $1,947m, with China sales growth of 34% (44% at CER) to $1,166m, ahead of recent trends. US sales increased by 16% to $1,877m; Europe sales returned to growth, increasing by 1% (8% at CER) to $1,047m. Japan sales increased by 30% (34% at CER) to $672m


These results were accompanied by further positive pipeline developments, with the second half of the year anticipated to be an exceptionally busy period for the pipeline.



H1 2019

Q2 2019



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Collaboration Revenue







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Reported4 Operating Profit







Core5 Operating Profit














Reported EPS6







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Pascal Soriot, Chief Executive Officer, commenting on the results said:

"The momentum generated last year continued into the first half, consolidating AstraZeneca's return to growth based on the strength of our new medicines. Five of these new medicines are anticipated to be blockbusters this year, supporting sales across both Oncology and BioPharmaceuticals. Emerging Markets, the US and Japan all grew strongly, and we delivered an encouraging turnaround in Europe in the second quarter. Selective investment in sustainable growth also continued, particularly in Emerging Markets and in our launch programmes. Additional regulatory approvals for Lynparza in ovarian cancer in the EU and Japan, together with approvals for Breztri and Bevespi in COPD in Japan, illustrated further progress from our pipeline.


Accompanying earnings growth this year, we are pleased to upgrade our Product Sales guidance and we are committed to working on our operating leverage and driving cash generation over the long term."



Financial summary


-      Product Sales increased by 12% in the half (17% at CER) to $11,183m


-      The Reported Gross Margin increased by two percentage points in the half to 80%, partly reflecting the mix of Product Sales and manufacturing efficiencies; the Core Gross Margin increased by one percentage point to 81%


-      Reported Operating Expenses increased by 5% in the half (10% at CER) to $8,238m and represented 73% of Total Revenue (H1 2018: 76%)Core Operating Expenses increased by 1% (5% at CER) to $6,922m and represented 61% of Total Revenue (H1 2018: 67%), demonstrating operating leverage


-      Reported R&D Expenses declined by 1% (an increase of 3% at CER) to $2,622m. Core R&D Expenses declined by 2% (an increase of 2% at CER) to $2,505m


-      Reported SG&A Expenses increased by 9% (14% at CER) to $5,457m; Core SG&A Expenses increased by 3% (7% at CER) to $4,258m, primarily reflecting growth in China, as well as ongoing additional support for new medicines


-      Reported Other Operating Income and Expense declined by 35% in the half (34% at CER) to $706m; Core Other Operating Income and Expense increased by 1% (2% at CER) to $708m; in the second quarter, Core Other Operating Income and Expense declined by 80% to $114m


-      The Reported Operating Margin was stable in the half at 14%; the Core Operating Margin increased by six percentage points (five at CER) to 27%


-      Reported EPS of $0.56 in the half, based on a weighted-average number of shares of 1,289m, represented an increase of 3% (stable at CER); Core EPS increased by 38% (40% at CER) to $1.62. The difference between the Reported and Core performance partly reflected the impact of a favourable $346m legal settlement in H1 2018, recognised as income in Reported Other Operating Income and Expense, as well as the commencement of the amortisation of Lokelmaand fair-value adjustments arising on acquisition-related liabilities recognised in Reported SG&A Expense in Q2 2019


-      The Reported Tax Rate was 25% (H1 2018: 19%); the Core Tax Rate was 21% (H1 2018: 19%). The tax rates in the half reflected the geographical mix of profits and the impact of collaboration and divestment activity


-      An unchanged first interim dividend of $0.90 per share


-      The Company today upgrades part of its financial guidance for the year (see page four)


Commercial summary



Sales growth of 52% in the half (58% at CER) to $4,059m, including:


-    Tagrisso sales of $1,414m, representing growth of 86% in the half (92% at CER) that was driven by 2018 regulatory approvals in the 1st-line EGFR7-mutated (EGFRm) NSCLC8 setting. There was a sequential quarterly increase of 16% in US sales of Tagrisso from the first to the second quarter, partly reflecting continued underlying demand growth. Japan sales increased by 147% (151% at CER) to $291m


-    Imfinzi sales of $633m, representing growth of 244% (248% at CER). While the majority of sales were in the US, Europe sales amounted to $60m (H1 2018: $3m), with Japan sales of $86m ($nil in H1 2018)


-    Lynparza sales of $520m, representing growth of 93% (100% at CER), driven by expanded use in the treatment of ovarian and breast cancer in the US and Europe. The performance included growth in Emerging Markets of 228% (267% at CER) to $59m and growth in Japan of 480% (490% at CER) to $58m


-    The performance from more-mature Oncology medicines in the half included Faslodex growth of 4% (8% at CER) to $521m and an 8% decline in Iressa sales (3% at CER) to $252m. The Company anticipates increased challenges for both medicines in the second half, partly reflecting additional generic Faslodexcompetition in the US and the pricing impact on Iressa from centralised procurement in China


-    Oncology sales growth in Emerging Markets of 40% (52% at CER) to $1,048m



Sales growth of 12% in the half (16% at CER) to $2,094m, including:


-    Brilinta sales of $737m, representing growth of 21% (26% at CER). Patient uptake continued in the treatment of acute coronary syndrome and high-risk post-myocardial infarction


-    Farxiga sales of $726m, with growth of 14% (19% at CER), ahead of an anticipated label update in major markets to reflect results from the DECLARE CV outcomes trial


-    Bydureon sales of $283m, a decline of 4% (3% at CER), driven by production constraints that are now resolved


-    New CVRM sales growth in Emerging Markets of 31% (44% at CER) to $521m



Sales growth of 5% in the half (10% at CER) to $2,535m, including:


-    A Symbicort sales decline of 10% (6% at CER) to $1,170m, reflecting continued pricing pressure and the impact of managed-market rebates in the US. This was partially offset by positive volumes from US government-buying patterns


-    Pulmicort sales growth of 13% (19% at CER) to $716m; the majority of Pulmicort sales were in Emerging Markets. Q2 2019 global sales increased by 16% (23% at CER) to $333m


-    Fasenra sales of $296m, representing growth of 244% (249% at CER). New-to-brand prescription data showed that Fasenra was generally the preferred novel-biologic medicine for the treatment of severe asthma during the period, in markets where Fasenra is established, despite being the third such medicine to launch


-    Respiratory sales growth in Emerging Markets of 22% (30% at CER) to $956m


Emerging Markets

As the Company's largest region, at 35% of total Product Sales, Emerging Markets sales increased by 15% in the half (24% at CER) to $3,951m, including:


-      A China sales increase of 27% in the half (35% at CER) to $2,408m. Highlights included Oncology sales growth of 58% (68% at CER) to $635m and New CVRM growth of 72% (83% at CER) to $218m


-    An ex-China sales increase of 1% in the half (10% at CER) to $1,543m. The performance was negatively impacted by product divestments and developments in Brazil. Positive developments, however, included sales of $569m in (non-China) Asia-Pacific (+5%, +9% at CER) and $112m in Russia (+67%, +85% at CER)



Pipeline highlights

The following table highlights significant developments in the late-stage pipeline since the prior results announcement:


Regulatory approvals

-     Lynparza - ovarian cancer (1st line, BRCAm9): regulatory approval (EU, JP)

-     Qternmet XR - T2D10: regulatory approval (US)

-     Bevespi - COPD11: regulatory approval (JP)

-     Breztri (formerly PT010) - COPD: regulatory approval (JP)

Regulatory submissions and/or acceptances

-     Lynparza - pancreatic cancer (BRCAm): regulatory submission acceptance (EU)

-     Forxiga - T2D CVOT12: regulatory submission (CN)

-     Lokelma - hyperkalaemia: regulatory submission (JP, CN)

Major Phase III data readouts or other significant developments

-     Imfinzi - SCLC13: met Phase III primary endpoint

-     Imfinzi - SCLC: Orphan Drug Designation (US)

-     trastuzumab deruxtecan - breast cancer (3rd line, HER2+): met pivotal Phase II primary endpoint

-     Calquence - CLL14 (relapsed/refractory): met Phase III primary endpoint

-     Calquence - CLL (treatment-naïve): met Phase III primary endpoint

-     Forxiga - T2D CVOT: positive opinion (EU)

-     Farxiga - T1D15: complete response letter (US)

-     Lokelma - hyperkalaemia: priority review (CN)

-     roxadustat - anaemia of CKD16: pooled Phase III CV safety confirmed

-     Breztri - COPD: priority review (CN)

-     Fasenra - severe asthma (self-administration and auto-injector): positive opinion (EU)


Financial priorities, including guidance

All measures in this section are at CER and Company guidance is on Product Sales and Core EPS only.


All guidance and indications provided assume that the UK's anticipated exit from the European Union (EU), even in the event of a no-deal exit, proceeds in an orderly manner such that the impact is within the range expected, following the Company's extensive preparations for such an eventuality.


AstraZeneca anticipates strong and sustainable long-term Product Sales growth to be accompanied by operating leverage, leading to an improvement in profitability and cash generation.


Product Sales

Reflecting the performance in the first half and the return to Product Sales growth in H2 2018, Product Sales in FY 2019 are now expected to increase by a low double-digit percentage; the prior guidance was for a high single-digit percentage increase.


Core EPS

As a key part of its long-term growth strategy, the Company is committed to focusing on appropriate cash-generating and value-accretive collaboration activities that reflect the ongoing productivity of the pipeline. Separately, AstraZeneca will, from time to time, also focus its medicine portfolio through divestments.


AstraZeneca reiterates its Core EPS guidance of $3.50 to $3.70 over the full year. This guidance includes the anticipation of a lower sum of Collaboration Revenue and Core Other Operating Income and Expense versus the prior year.


Variations in performance between quarters can be expected to continue. The Company is unable to provide guidance and indications on a Reported basis because the Company cannot reliably forecast material elements of the Reported result, including the fair-value adjustments arising on acquisition-related liabilities, intangible-asset impairment charges and legal-settlement provisions. Please refer to the section Cautionary Statements Regarding Forward-Looking Statements at the end of this announcement.


Operating leverage

The Company expects to deliver significant operating leverage over the long term. Encouraging progress was made in the half, with the Reported Operating Margin stable at 14% and the Core Operating Margin increasing by six percentage points (five at CER) to 27%. Core Operating Profit is anticipated to increase in the year by a mid-teens percentage versus FY 2018, ahead of Product Sales.


Cash generation

In FY 2019, the cash performance is expected to include a number of payments relating to prior business-development transactions; the majority of the value of these payments in the year was settled in the first half. AstraZeneca generated a net cash inflow from operating activities of $491m in the half, compared to an outflow of $75m in H1 2018.


Other indications

The Company also provides other indications for FY 2019:


-      Capital expenditure is expected to be broadly stable and restructuring expenses are targeted to reduce versus the prior year


-      A Core Tax Rate of 18-22% (FY 2018: 11%)


Currency impact

If foreign-exchange rates were to remain at the average of rates seen in the period from January to June 2019, it is anticipated that there would be a low single-digit percentage adverse impact on Product Sales and Core EPS. In addition, the Company's foreign-exchange rate sensitivity analysis is contained within the operating and financial review.



AstraZeneca's sustainability ambition is founded on making science accessible and operating in a way that recognises the interconnection between the health of the business, people and the planet and that each of these impact one another. The Company's sustainability ambition is reinforced by its purpose and values, which are intrinsic to its business model and ensures that the delivery of its strategy broadens access to healthcare, minimises the environmental footprint of its activities and products of medicines and processes and ensures that all business activities are underpinned by the highest levels of ethics and transparency. A full update on the Company's sustainability progress is shown in the Sustainability section of this announcement.