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Earnings

New cancer drugs, China give AstraZeneca welcome sales boost

Reuters with CNBC.com
Key Points
  • AstraZeneca forecast a second straight year of sales growth on Thursday, driven by cancer medicines and other new drugs.
  • CEO Pascal Soriot told CNBC on Thursday that the company had spent between 40 and 50 million pounds so far preparing for Brexit. 
  • AstraZeneca has suffered the industry's biggest loss of drug patents since 2012, wiping out more than half of its sales.
VIDEO2:1002:10
AstraZeneca ‘excited’ to return to sales growth after decade-long decline, CEO says

AstraZeneca forecast a second straight year of sales growth on Thursday, driven by cancer medicines and other new drugs as the British drugmaker recovers from losing major patents.

AstraZeneca's push to turn around a slump in sales rides in large part on cancer treatments Imfinzi and Lynparza, as it looks to compete with Merck & Co's blockbuster Keytruda.

The drugmaker's fourth quarter earnings showed oncology drug sales rose 61 percent year-on-year to $1.78 billion, while sales of all AstraZeneca products in China, which have more than doubled since 2012, also rose 22 percent to $948 million.

AstraZeneca has suffered the industry's biggest loss of drug patents since 2012, wiping out more than half of its sales, but analysts now believe it is poised for one of the sector's fastest growth rates in the coming years.

Shares in AstraZeneca rose 2.7 percent to 5,875 pence in early trade as analysts welcomed the earnings.

Speaking to CNBC's Joumanna Bercetche Thursday, CEO Pascal Soriot said the company was entering a period of sustainable sales growth that would translate into profit growth in the coming years.

"Now is the time to reorganize ourselves and focus even more on oncology and biopharmaceuticals," he said. "Oncology represents about 50 percent of our pipeline and 50 percent of our sales growth moving forward, so our goal is to make sure our commercial organization and R&D (research and development) organization work hand-in-hand."

Brexit preparations

Soriot added that AstraZeneca had made several preparations for Brexit to ensure patients did not miss out on medicines following the U.K.'s departure from the bloc.

"We have increased inventory (so we have enough stock for) six weeks — we believe it is sufficient for the time being, we believe we are as ready as we can be," he said. "We have also explored other routes because common routes like Dover will probably be very busy and congested in the case of a disorderly Brexit, so we've been looking at other ways to ship our products from the U.K. to Europe."

VIDEO1:5101:51
Brexit preparations have cost £40 million to £50 million: AstraZeneca CEO

Under WTO rules there are no import duties for pharmaceuticals, meaning AstraZeneca will not be faced with additional costs from tariffs.

"The cost for us has been duplicating quality control release measures, we've had to duplicate those in Sweden so we can release (U.K.-made) medicines in Europe under European standards. It's cost us about 40 to 50 million pounds," Soriot told CNBC.

The highly regulated drugs sector is seen as one of the most vulnerable to a "no-deal" outcome due to its pan-European supply chains and need for regulatory oversight.

"2019 will prove difficult, with Brexit quickly approaching and the threat of a widening skills gap for industry," Julie Palmer, a partner at restructuring consultants Begbies Traynor said.

She added, however that if the company can continue the success of its latest drugs then it will likely avoid any major impact.

Overall product sales in the three months ended Dec. 31 rose 8 percent to $5.77 billion at constant currency, helping return AstraZeneca to annual sales growth for the first time since 2014.

Analysts had forecast product sales of $5.66 billion, according to a company provided consensus.

The drugmaker said it expects a high single-digit percentage rise in product sales in 2019 and core earnings of $3.50 to $3.70 per share.