Astrazeneca: Strength Ahead as COVID Vaccine Sales Wind Down

Written by: Laura Hoy | Hargreaves Lansdown

Full year revenue rose 38% to $37.4bn, ignoring the effect of exchange rates. The coronavirus vaccine contributing $4bn. This reflected strong growth across all product categories, apart from Other Medicines.

Cash profits declined 6% to $7.6bn, This includes a $2.2bn charge related to the Alexion acquisition.  

The group will pay a second interim dividend of $1.97 per share, bringing the total for the year to $2.87. The board intends to increase annual dividends to $2.90. 

The shares rose 3% following the announcement

Covid vaccine sales added $4bn to sales at AstraZeneca, but coronavirus had the opposite impact on profits. Outfitting staff with PPE and providing tests together with increased investment in vaccine and treatment development all weighed on the bottom line.  However the group’s obligation to keep the cost of vaccines low is starting to dwindle as global demand fades. Management’s expecting Evusheld, a monoclonal antibody treatment, to make up a greater proportion of sales going forward. This will boost profitability for the Covid division, though margins won’t reach the same 60%+ levels the rest of the company enjoys. 

The real driver for Astra’s profit decline was the Alexion acquisition. The purchase brought Rare Diseases under the Astra umbrella and our fist glimpse at performance for this sector wasn’t too shabby.  Management were confident enough in the promise of future growth that they announced a dividend hike.

There’s a lot riding on the successful integration of Alexion and growth in AstraZeneca’s newly approved drugs like Evusheld. Net debt more than doubled in the wake of the acquisition and as interest rates rise, AZN will need sufficient cashflow to pay it down. Astra’s results were undoubtedly positive, but execution risk looms.

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