AstraZeneca PLC said it will hit its $45 billion revenue target for 2023 a year early thanks to the acquisition of rare disease company Alexion Pharmaceuticals Inc. and strong sales of its cancer medicines, as the U.K.'s largest drugmaker moves to charge market rates for its COVID-19 vaccine.
Speaking to reporters after the Cambridge, U.K.-based company reported third-quarter results, CEO Pascal Soriot said the original $45 billion target, first set out in 2014, is closer to between $40 billion and $41 billion at current exchange rates.
"If you look at the consensus, you probably will conclude that we will reach the target one year early versus what we had announced," Soriot told S&P Global Market Intelligence on the Nov. 12 call. "So, it's quite exciting to have been able to do this and, of course, we've added Alexion to our portfolio but we've also over the years divested a lot of products ... so to get there, even though many people didn't believe we would achieve it is very rewarding."
Soriot called a 48% year-over-year increase in total revenue for the third quarter — AstraZeneca's highest quarter ever — "a historical landmark for [our] company." The numbers vindicate the CEO's decision to rebuff U.S. pharmaceutical giant Pfizer Inc.'s approach to acquire the company in 2014, for which Soriot faced skepticism at the time.
Soriot's ambitious sales targets were predicated on the promise of building up the oncology business. Notable success in China — in addition to the rapid acceleration of cancer drugs Tagrisso and Imfinzi and investment in the lifecycle management of Lynparza — yielded rich rewards. The rare disease franchise and a new vaccine unit, headed up by its COVID-19 shot Vaxzevria that is set to achieve modest profitability from 2022 sales onward, will further bolster the CEO's strategy.
"The exceptional performance from the oncology pipeline has offset the underperformance of [blood thinner] Brilinta, respiratory and diabetes franchises which were existing marketed assets in the cards the new CEO was dealt on arrival," said Berenberg analyst Luisa Hector, who rates the stock a "buy."
Hector expects AstraZeneca's management will make good choices and back the best pipeline assets, having already demonstrated a keen eye on the long term. The analyst also noted the company's ability to plug gaps in its drug launch schedule with excellent external assets including cancer drugs Enhertu and DS-1062, a collaboration with Japanese partner Daiichi Sankyo Co. Ltd.
COVID-19 vaccine profits
With the integration of Alexion complete, AstraZeneca has created a new unit for its research and manufacturing of its Vaxzevria shot and related long-acting antibodies, which also houses its nasal flu spray Flumist and drugs for respiratory syncytial virus. While the COVID-19 vaccine posted a small profit in the third quarter — after generating a loss over the previous two quarters — AstraZeneca is slowly transitioning to commercial contracts as the virus moves to an endemic stage and the company's pledge to not make a profit from the shot during the pandemic comes to an end.
"We did actually start this project to help — but we also said that, at some stage in the future, we will transition to commercial orders," Soriot said. "It will never be high priced, because we want the vaccine to remain affordable to everybody around the world."
"It has a future," the CEO added. "But it's not something that we see as a huge profit earner, that's for sure."
AstraZeneca reported a 19% year-over-year jump in oncology sales to $9.7 billion for the first nine months of the year, while heart and kidney medicines were 14% higher at $6.03 billion, and respiratory and immunology sales jumped 16% to $4.56 billion in the same period. The first contribution from the portfolio of rare disease drugs acquired via Alexion generated $1.31 billion of revenue in just under four months.
Research and development costs advanced by 34% to $5.59 billion due to continued investment in Vaxzevria and late-stage long-acting COVID-19 antibody AZD7442, as well as several phase 3 oncology trials and earlier biopharmaceutical development programs. Since June, the company has reported eight positive late-stage trial results, including Alexion's Wilson's disease treatment ALXN1840, which would be the first new therapy for the rare genetic disorder in more than 30 years if approved by regulators.