Will diversification help AstraZeneca share price at Q1 figures?

Beyond quarterly earnings, positive sentiment surrounding the company’s initiatives to drive revenues after the pandemic-related vaccine euphoria ends is supporting the AstraZeneca share price. 

Pharmaceuticals giant AstraZeneca [AZN.L] is expected to report a 52.14% year-over-year hike in revenues when it announces its first-quarter results on 29 April, boosted by sales of its Covid-19 vaccine.

According to analysts at Zacks, the winner of the UK’s Covid-19 vaccine race is set to report revenues of $11.14bn for the period ending 31 March. Its earnings per share are anticipated to come in at $0.85, up almost 5% from the $0.82 reported this time last year.

Its Covid-19 vaccine, which began being rolled out around the globe at the beginning of 2021 and, despite the easing of the pandemic, subsequent boosters have continued to drive sales. CEO Pascal Soriot (pictured above) had said five of AstraZeneca’s medicines crossed new blockbuster thresholds in the December quarter.

Contributions from its newer drugs will support the current quarter’s numbers, Zack’s analysts said. These include cancer medicines such as Lynparza, Tagrisso and Imfinzi. Its $39bn acquisition of Alexion Pharmaceuticals, which closed last July, is also expected to have hiked sales in immunology and rare diseases.

However, Zacks added that its diabetes franchise faces “stiff competition while pricing pressure is hurting sales in the respiratory unit”. It also noted that sales in China are slowing.

AstraZeneca shares gain on strategic initiatives

The AstraZeneca share price has rocketed nearly 37% over the past 12 months to 10,280p at the close on 22 April.

Aside from the Covid-19 vaccine boost, the company’s stock has also made gains as the acquisition and integration of Alexion progresses.

Recent regulatory wins, relating to its Enhertu drug for adults with metastatic non-small cell lung cancer, are also supporting the AZN stock price. Enhertu has been granted ‘priority review’ status after a successful medical trial.

As a defensive stock, AZN is also benefitting from overall economic uncertainty. Pharmaceuticals typically perform well in these times, as people will continue to fall ill and seek treatment regardless of the economy’s health.

Profitability dilemma

In its fourth quarter, AstraZeneca reported revenues of $12.01bn, up 62% from the previous year and ahead of analysts’ forecasts of $10.9bn. However, it reported a $346m net loss versus a profit of $1.01bn in the same period last year, attributed to Alexion acquisition costs and rising cost pressure in China.

On the back of improved confidence in long-term growth and cash generation, AstraZeneca increased its annualised dividend by $0.10 to $2.90 and approved a second interim dividend for FY 2021 of $1.97.

Soriot called 2021 a landmark year for the group. “The positive news from our pipeline, including approvals for Evusheld [a medicine given to prevent Covid-19 in people whose immune response is poor] and Tezspire [an asthma treatment], supports the outlook for 2022. This, along with the transformative acquisition of Alexion, means that we are confident in our long-term growth and profitability,” he said.

What's next for AstraZeneca?

According to MarketScreener, analysts have a consensus ‘buy’ rating on the AstraZeneca stock, although they will want to see the company increasingly looking beyond Covid-19 as the pandemic becomes less severe.

Deutsche Bank has a ‘buy’ rating on the stock, driven by Enhertu’s move towards approval. “Whilst commercially niche, we view [it] as a clear minor positive,” said Deutsche Bank. It has a target price of 11,500p on the AstraZeneca stock.

Stifel analyst Eric Le Berrigaud has a 12,300p price target. He says AstraZeneca will remain the fastest growing pharma company he covers. As reported by The Fly, he expects a 14.2% core EPS compound annual growth rate over the next five years. AstraZeneca stock is not “receiving the deserved valuation for this” he added.