AstraZeneca’s [AZN.L] share price maintained a steady performance for most of 2020 and even reached an intraday high of 10,120p on 20 July before closing at 9,245.43p — its best close on record. This came four months after the market sell-off in March, which pushed AstraZeneca’s share price to an intraday low of 5,871p before closing at 6,171.23p — down 16.6% for the year to date.
Since its peak, however, AstraZeneca’s share price has been on a downward trajectory. Although this trend has been offset by the odd spike, AstraZeneca’s share price finished 2020 down 0.9%.
Despite the stock growing 2.3% through January to 7,491p, it was only up 0.1% over a 52-week period. AstraZeneca’s share price has since fallen 1.03% to 7,312p in February so far (as of 8 February’s close).
Investors interested in the wider healthcare theme will want to consider what happens to AstraZeneca’s share price when the company reports its fourth-quarter earnings on 11 February.
Product sales driving growth
When AstraZeneca released its third-quarter earnings on 5 November last year, revenues were up 3% year-over-year, both on a reported and constant exchange rate (CER) basis, to $6.58bn for the quarter. This marginally beat the Zacks Equity Research consensus estimate of $6.54bn.
The company reported earnings per share of $0.49, exactly matching the Zacks estimate. Meanwhile, core earnings per share of $0.94 were flat against the year-ago period.
In the three-day run up to the report, a bullish market pushed AstraZeneca’s share price up 9.7% to close at 8,529p on 5 November. The stock then dipped 2.6% over the next two trading sessions before climbing to 8,530p on 10 November and then rising again to 8,785p the following day. This marked an 18.8% year-to-date rise.
A 9% year-over-year increase in product sales was credited as the main growth driver for AstraZeneca’s revenues. New medicines alone “added $2.6bn of additional revenue year-to-date”, Pascal Soriot, CEO of AstraZeneca, noted on the earnings call.
“Tagrisso, Imfinzi and Lynparza as the biggest contributors, followed by Farxiga, Calquence and Fasenra. In particular, Calquence is making very rapid progress. We now have 13 new medicines contributing growth and adding further diversification to the revenue as we look ahead,” he added.
“Tagrisso, Imfinzi and Lynparza as the biggest contributors, followed by Farxiga, Calquence and Fasenra. In particular, Calquence is making very rapid progress. We now have 13 new medicines contributing growth and adding further diversification to the revenue as we look ahead” - Pascal Soriot, CEO of AstraZeneca
As one of the biggest pharmaceutical companies in the world, and one producer of a COVID-19 vaccine, AstraZeneca is an important marker for thematic ETFs such as the iShares Nasdaq Biotechnology ETF [IBB].
The fund has skyrocketed since the beginning of 2020, reaching its highest-ever close of $167.75 on 25 January — up 44% in the last year. This far outpaced AstraZeneca’s share price, which climbed 6.7% in the same period. AstraZeneca’s Nasdaq listing accounts for 1.84% of the ETF.
Looking ahead to the next release, analysts at Zacks expect AstraZeneca to report earnings of $0.53 per share, which would represent year-over-year growth of 17.9%. Meanwhile, revenues are expected to have grown 4.4% from the year-ago period to $6.96bn.
Will vaccine delays stunt growth?
Factory issues in Belgium have delayed the production of AstraZeneca’s COVID-19 vaccine, which in turn has affected the supply-chain of vaccines in Europe, according to The Wall Street Journal. Ultimately, this could lead to a shortfall of 60%, leaving AstraZeneca with just 30 million of the 80 million doses agreed with the EU.
“Vaccine production is not one of [AstraZeneca’s] core competencies and it never has been,” Andrew Berens, an equity analyst at SVB Leerink, told the publication. “I’m sure they didn’t realise how resource-intensive it was going to be, and I’m sure they didn’t anticipate it being harmful to them, their brand or the company.”
“Vaccine production is not one of [AstraZeneca’s] core competencies and it never has been. I’m sure they didn’t realise how resource-intensive it was going to be, and I’m sure they didn’t anticipate it being harmful to them, their brand or the company” - Andrew Berens, an equity analyst at SVB Leerink
In addition to the backlash that this has sparked, the error is detrimental to Soriot’s 2020 pledge to vaccinate the world without profit.
To make up for the shortfall, the EU may “police and potentially ban vaccine exports,” according to The Wall Street Journal. The bloc is demanding that AstraZeneca send doses from the UK, where production is booming.
While this may be bad for the company’s reputation, it’s difficult to say how the news will affect its earnings or AstraZeneca’s share price. As it never intended to profit from the COVID-19 vaccine in the first place, investors may focus on the success of its new medicines and the potential of its pipeline.
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