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AZ shares spike on good second quarter led by cancer drugs

Soriot expecting no fewer than five of AZ’s new drugs to hit blockbuster status this year

AstraZeneca building

AstraZeneca followed GlaxoSmithKline in raising its 2019 forecasts today, after an expectation-topping second quarter driven by its cancer drugs and sales in emerging markets.

Oncology unit sales rose an impressive 57% to $2.12bn in the first six months of the year, with turnover of Tagrisso (osimertinib) for lung cancer almost doubling to $784m thanks to a move up the treatment pathway into second- and first-line treatment.

The quarter consolidates Tagrisso’s position as AZ’s top-selling product, with strong support from checkpoint inhibitor Imfinzi (durvalumab) and PARP inhibitor Lynparza (olaparib), which brought in $338m and $283m respectively.

The company’s focus on emerging markets, particular China, is also paying off with sales rising a third to $1.94bn overall, with China accounting for $1.17bn of that total. Meanwhile, its business in Japan also grew by more than 30%, and there was also strong growth in Russia.

Overall, sales rose 19% to $5.72bn in the quarter – ahead of analyst consensus forecasts – as AZ continued a return to growth that started in 2018 after years of pressure from patent expiries and genetic competition.

Operating profit also exceeded expectations by around $200m, coming in at $1.36bn, and AZ says it now expects double- rather than single-digit sales growth this year. Shares in the company were up more than 5% in trading this morning to a record high, adding more than £4bn to its value.

Chief executive Pascal Soriot said that while the first quarter was good, the second quarter has been “outstanding” and he is now expecting that no fewer than five of AZ’s new drugs will hit blockbuster status this year.

That’s the cancer trio of course, along with cardiovascular drug Brilinta (ticagrelor) – up 28% to $389m in the quarter – and diabetes therapy Farxiga (dapagliflozin), which rose 16% to $377m.

Maintaining that momentum will require the pipeline to continue to deliver and earlier this year AZ reorganised its R&D operations to reflect the importance of cancer in its future growth, splitting the division into oncology and biopharma section.

Much of the newsflow in the latter half of the year will come from line extensions for its cancer trio, but AZ is also gearing up to file its HER2-targeting antibody-drug conjugate trastuzumab deruxtecan (DS-8201), a rival to Roche’s Kadcyla in breast cancer, in the US before the end of the year.

AZ paid a whopping $1.35bn upfront to license DS-8201 and take on Kadcyla, which had sales approaching $1bn last year, and could end up paying up to $6.9bn if it fulfils its potential. Soriot told Bloomberg this morning that the drug has the potential to transform breast cancer care, so the investment was worth the hit on cash flow.

He also said that the primary focus is on R&D, although AZ is “open” to mergers and acquisitions, particularly bolt-on deals, to continue to add to the pipeline.

Also coming down the pipe are BTK inhibitor Calquence (acalabrutinib), which could be filed for chronic lymphocytic leukaemia (CLL) before year-end to add to its current use in mantle cell lymphoma, MEK inhibitor selumetinib to be filed for neurofibromatosis type 1, and roxadustat for anaemia caused by chronic kidney disease.

Article by
Phil Taylor

25th July 2019

From: Research

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