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AstraZeneca COVID-19 Vaccine Costs Hit Q1 Earnings; Cancer Meds, Emerging Markets Save The Day

  • AstraZeneca Plc (NASDAQ: AZN) generated $275 million in revenue from its non-profit COVID-19 vaccine in Q1. Still, it has not been able to keep up with its costs, resulting in a hit to core earnings by $0.03 and a warning the vaccine effort could continue to affect margins.
  • The company said it cost money to provide an “equitable supply” of the vaccine at no profit, resulting in a “significant impact” on overall profit margins. Q1 Gross profit margins declined 3 percentage points to 74.6%.
  • It reported sales of $7.3 billion above the consensus of $7.1 billion, growing 15% Y/Y. Sales of cancer drugs and growth in emerging markets helped the company beat earnings and sales expectations. Emerging markets revenue of $2.59 billion grew 14% Y/Y.
  • Overall first-quarter profit was $1.56 billion, roughly double a year ago. Core EPS of $1.63 was up 55% Y/Y, surpassing analysts’ consensus of $0.97. 
  • Quarterly sales growth was driven by best-selling lung cancer drug Tagrisso, up 17% to $1.15 billion. Revenues from heart and diabetes drug, Farxiga, jumped by more than half to $625 million on new prescriptions to treat heart failure.
  • Vaccine revenue included delivery of about 68 million doses. Sales in Europe, where it faces a legal case, were $224 million, $43 million in emerging markets, and $8 million in the rest of the world.
  • AstraZeneca said it would apply for U.S. emergency use in the coming weeks, adding global data from late-stage and emerging real-world data following a roll-out after U.S. trials showed the vaccine was 76% effective.
  • In Q1 earnings presentation slides, AstraZeneca said it was ramping up vaccine supplies, and production yields were improving, without giving any details.
  • “We expect the impact of COVID to reduce and anticipate a performance acceleration in the second half of 2021,” Chief Executive Pascal Soriot said in a statement.
  • Guidance: AstraZeneca reiterated its full-year outlook for total revenue increasing by a low-teens percentage, and core earnings per share rising to $5.00 from $4.00, all at constant exchange rates. 
  • However, the guidance does not include any impact from sales of the vaccine and its $39 billion purchase of Alexion, which is expected to close in the third quarter.
  • Price Action: AZN shares are up 3.6% at $53.24 in the premarket trading on the last check Friday.

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