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Will an entry into rare diseases aid the AstraZeneca share price recovery?

More people know of the AstraZeneca [AZN.L] share price compared to this time last year. The pharmaceutical giant’s COVID-19 vaccine efforts have correlated to a relatively positive performance in the AstraZeneca share price.

Since the start of 2021, the AstraZeneca share price is up 14.9% to 8,253p at the close on 27 July. Although the AstraZeneca share price is down 1.9% in the last 52 weeks, the stock is up 27.8% from its 52-week low of 6,499.80p set on 21 May. The AstraZeneca share price is 18% down from its all-time high of 10,120p, which it reached on 20 July.

These gains made by the AstraZeneca share price so far in 2021 may not sound overly impressive but considering that pharmaceutical stocks can be volatile, the AstraZeneca share price has risen 114.5% in the last five years (through 26 July).

14.9%

AstraZeneca's YTD share price rise

 

Compare this to fellow COVID-19 vaccine producer the Pfizer [PFE] share price, which has gained 16.7% year to date (through 27 July) and 23% in the last 52 weeks.

Though concerns about vaccine side-effects have been a bit of an overhang on the AstraZeneca share price in more recent weeks, the company’s decision to distribute the vaccine without profit has been commended and the move will have likely boosted the company’s reputation among investors.

 

Can the AstraZeneca share price benefit from a bump in earnings?

AstraZeneca’s growth in the first quarter of fiscal 2021 was robust. Revenue was up 15% to $7.32bn or 11% to $7.045bn excluding the COVID-19 vaccine’s contribution. Earnings per share were $1.63 or three cents lower when not taking the vaccine’s contribution into account.

Net income for the first three months of the year was $1.51bn, up 100% from the first quarter of 2020, making it most profitable quarter since the fourth quarter of 2016.

$7.32billion

AstraZeneca's Q1 fiscal 2021 revenue - a 15% rise

 

Of note, its oncology sales grew 20% year-over-year to $3.024bn, while its new cardiovascular, renal and metabolism, or CVRM, segment climbed 19% to $1.306bn. Respiratory and immunology declined by a percentage point to $1.546bn.

There was also strong growth across all regions. Sales in emerging regions rose 14% year-over-year to $2.592bn, China’s growth was up 19% to $1.679bn, US growth up 10% to $2.31bn, and sales in Europe climbed 28% to $1.546bn.

No guidance is available for the second quarter but the company has reiterated its guidance for the full-year first issued in the fourth quarter of 2020 earnings call. Earnings are expected to be between $4.75 and $5.00 per share, up from $4.02 in 2020.

Revenue is expected to increase by a low-teens percentage on $26.617bn revenue brought in in the previous fiscal year. Revenue estimates for the current quarter from analysts polled by Yahoo Finance came in at $7 36bn, while Zacks Equity Research provided a slightly higher estimate of $7.79bn, representing year-over-year increases of 17.2% and 24%, respectively.

 

AstraZeneca expands into rare diseases

At the time the guidance was issued, AstraZeneca stressed that the $38.1bn acquisition of Alexion, which closed on 22 July, hadn’t been factored in.

Alexion will be AstraZeneca’s foray into rare diseases. The standout drug in the former’s portfolio is Soliris. In the first quarter of 2021, Soliris sales were $1.02bn, accounting for almost 63% of total revenue of $1.63bn. Soliris is one the world’s most expensive drugs and currently doesn’t face any big competition, which means it’s likely to continue being a blockbuster earner for some time yet.

AstraZeneca’s second-quarter earnings call should give insight into how the company expects the acquisition to impact its full-year forecast.

As reported by ProactiveInvestors, analysts at UBS expect it to add $0.40 to AstraZeneca’s full-year earnings guidance.

The deal is expected to help AstraZeneca continue its growth drive in China, where Alexion currently has little-to-no penetration.

“China could become a very large market for rare diseases and when the market does open up, we are very well positioned to expand there” - AstraZeneca ex-CFO Marc Dunoyer

 

Then-AstraZeneca CFO Marc Dunoyer (he was replaced by Alexion CFO Aradhana Sarin once the takeover was finalised) told Barron’s in an interview: “China could become a very large market for rare diseases and when the market does open up, we are very well positioned to expand there.”

Jefferies analyst Peter Welford wrote in a note, seen by Business Insider, that they “see the strategic merits [of the deal] being more widely appreciated”. The new pipeline “should aid recovery” of the AstraZeneca share price after “recent weaknesses linked to side effects and supply disputes”. Welford has a price target of 9,950p for the AstraZeneca share price.

AstraZeneca is a top holding in the VanEck Vectors Pharmaceutical ETF [PPH] with a weighting of 5.20% as of 27 July and has increased 12.6% so far this year.

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