Pharma giant AstraZeneca (LSE: AZN) reported its results for the first quarter of 2015 today, and while headline revenue fell, the group reported strong growth in key areas.
Total revenue for the period declined by 6% reflecting the particular weakness of key trading currencies against the US dollar. Excluding the negative effect of currencies, revenue ticked higher by 1% year on year. Improved profit margins helped the group’s core operating profit rise by 15% year on year, unadjusted for currency. Reported earnings per share for the quarter rose by 10% at constant exchange rates.
Astra’s strategic growth platforms were the key drivers behind this growth. These strategic priorities include sales to emerging markets and the group’s Brilinta blood thinner.
For the full year, Astra’s management expects the company to report low single-digit earnings per share growth and a slight decline in overall revenue.
Making progress
Astra’s first-quarter results show that the company is in the process of recovering. Earnings are starting to grow again, and new growth initiatives are paying off.
What’s more, alongside today’s results release, Astra announced the signing of an exclusive collaboration agreement with Celgene Corp for the development and commercialisation of MEDI4736, an immuno-oncology treatment, part of a new class of drugs that use the body’s immune system to battle cancer. This deal will see Celgene make an upfront payment of $450m to Astra.
Separately, Astra said it has entered into a deal with Innate Pharma for global co-development and commercialisation of the immuno-oncology IPH2201 treatment. Astra will make an initial payment of $250M for these rights.
But these are just two of the many collaborations and join-venture deals that Astra has signed over the past six months.
Other collaborations include: a five-year research deal with the Harvard Stem Cell Institute to search for new treatments for diabetes; a deal with Juno Therapeutics to study new immuno-oncology drugs; and four research collaborations aimed at harnessing the power of Astra’s CRISPR, a pioneering genome-editing technique.
Primed for growth
These collaboration deals and joint ventures are starting to add up. Moreover, the deals underline Astra’s commitment to return to growth by 2017 and increase revenues by three-quarters to $45bn by 2023.
And based on historic profit margin figures, earnings per share of £4.43 by 2023. Based on historic margin figures, if the company manages to hit this sales target, Astra will report a net profit of $9bn, around £5.6bn for 2023 — earnings per share of around £4.43.
Further, considering the fact that many high-growth pharmaceutical companies are currently trading at a forward P/E multiple of 20, in theory Astra’s shares could hit £88.60 by 2023.
That’s a capital gain of 86% and doesn’t take into account the company’s dividend yield of 3.9%!
Growth darling
So all in all, Astra has primed itself for growth and green shoots are already starting to show through.
