AstraZeneca (AZN) delivered better-than-expected second-quarter growth and reiterated full-year guidance while also announcing the purchase of Pfizer’s (PFE:NYSE) early-stage rare diseases gene therapy portfolio for up to $1 billion.

Investors welcomed the positive update with the shares 4.5% higher at £111.86, reversing weakness over the last couple of months which has seen the shares fall around 18%.

Pharmaceutical analyst Sean Conroy at Shore Capital said recent share price weakness ‘fundamentally looks overdone, and we see this robust set of results as a good opportunity for people to revisit AZN’s premium growth story.’

SECOND QUARTER BEAT

Second-quarter revenue grew 9% at constant currencies to $11.4 billion, beating consensus estimates by around 4%, while core EPS (earnings per share) was 38% ahead at $2.15, around 9% better than consensus estimates of $1.98.

Excluding the drag from weak Covid-19 medicines, revenue was 17% higher in constant currencies at $11.2 billion.

Sales from cancer medicines increased 22% to $4.38 billion, which was around 4% ahead of consensus according to Conroy, with a ‘notable’ beat from liver cancer drug Imfinzi/Imjudo.

WHAT DID THE COMPANY SAY?

Chief executive Pascal Soriot commented: ‘Each of our non-COVID-19 therapy areas saw double-digit revenue growth, with eight medicines delivering more than $1bn of revenue in the first half, demonstrating the strength of our business. 

‘Our pipeline momentum continues with eight positive pivotal trials for our Oncology (cancer) medicines so far this year, and we are encouraged by the positive data from TROPION-Lung01, the first pivotal trial of datopotamab deruxtecan. We look forward to sharing the data with the medical community at an upcoming medical congress and are proceeding to file the data with the US Food and Drug Administration.’

GUIDANCE MAINTAINED

The company reiterated 2023 guidance, which calls for revenue excluding Covid-19 medicines to grow by a low double-digit percentage and core EPS to increase by a high single-digit to low double-digit percentage.

AstraZeneca flagged a slightly higher adverse currency impact if foreign exchange rates in seen in June 2023 were to remain throughout the second half. This would reduce core EPS by a low to mid-single digit percentage compared with a single-digit percentage.

Conroy said: ‘On initial glance consensus continues to appear slightly ahead of guidance, as does our 2024 forecasts so provisionally anticipate edging down our Core EPS by circa 1% to 2% as we update for FX.’

‘AZN shares trade on a FY24 PE (price to earnings) ratio of around 16 times, broadly in line with US and European peers on approximately 15.5 times. We continue to believe a premium is warranted based on its earnings growth and pipeline prospects.’

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