Interactive Investor

ii view: AstraZeneca names ambitious sales target by 2030

Outperforming the FTSE 100 index year-to-date and now outlining sales and profit margin ambitions to 2030. Buy, sell, or hold?

21st May 2024 11:39

by Keith Bowman from interactive investor

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AstraZeneca logo on a smartphone Getty

Investor day

  • Plans to grow revenues to $80 billion by 2030, up from $45.8 billion in 2023
  • Expects to launch 20 new medicines before end of the decade

Chief executive Pascal Soriot said:

“The breadth of our portfolio together with continued investment in innovation supports sustained growth well past the end of the decade."

ii round-up:

Pharmaceutical giant AstraZeneca (LSE:AZN) today detailed plans to grow its sales and profit margin via the launch of new drugs up to the end of the current decade. 

At an investor day, the drug maker outlined its ambition to expand annual revenue to $80 billion compared with $45.8 billion in 2023, broadly in line with City hopes. The increase will be driven by growth of existing drugs and the launch of an expected 20 new medicines by 2030. 

Astra also maintained its ambition to grow core operating profit margin to the mid-30s percentage region by 2026, up from 32% in 2023, with at least the same level targeted to 2030. 

Shares in the FTSE 100 giant rose 1.4% in UK trading having come into this latest news up 14% year-to-date. That’s ahead of a near 9% improvement for the FTSE 100 index in 2024 so far, although behind a 30% gain for obesity drug maker Novo Nordisk A/S ADR (NYSE:NVO)

AstraZeneca’s medicines focus on cancer, or oncology; Cardiovascular, Renal and Metabolic (CVRM) illnesses, as well as rare diseases.

Management believes that many of the new medicines it plans to launch in the next few years, which are focused on these core areas, have the potential to generate more than $5 billion in peak year revenues. 

City analysts pointed to the area of smart chemo drugs, next generation immune oncology therapies or those boosting the body’s own immune system to fight cancer; and treatments to assist Cardiovascular, Kidney and Metabolic disorders, or CKM syndrome, in potentially growing sales. 

The Cambridge headquartered company also underlined its commitment to reducing its own carbon emissions as it expands sales. 

Broker Morgan Stanley reiterated its ‘overweight’ stance on the shares post the update, highlighting AstraZeneca as a ‘top pick.’ Interim results are scheduled for 25 July. 

ii view:

Founded in 1999 through a merger, Anglo-Swedish pharmaceutical and biotechnology company AstraZeneca today operates in over 100 countries. Oncology sales rose 26% during its first quarter ended March to $5.1 billion, with CVRM related drugs up 23% to $3 billion and rare diseases medicines growing 16% to $2.1 billion. Geographically, the Americas generates its biggest slug of sales at close to 46%. 

For investors, drug development remains an expensive business with such costs weighing on earnings. Acquisitions such as its recent $2.4 billion purchase of Canadian cancer specialist Fusion are also not without risk. Litigation and government investigations offer extra risk across the industry, while GSK (LSE:GSK) shares currently offer a forecast dividend yield of around 3.4% compared with Astra’s 2%.

More favourably, new medicines continue to be developed with over 180 investigational therapies at varied stages of clinical development at the time of its most recent results. Cancer treatment sales remain buoyant generating around two-fifths of overall revenues. Geographical diversity includes growing Chinese sales, while takeovers such as its 2021 purchase of rare disease focused Alexion have expanded its diversity of drug treatments.

On balance, and despite ongoing risks, a consensus analyst fair value estimate of around £132 per share looks to leave this FTSE 100 giant deserving of a place in diversified investor portfolios. 

Positives: 

  • An expected 20 new medicines by 2030
  • Acquisitions adding to diversity of drug treatments

Negatives:

  • Involved in various legal proceedings considered typical to its business, including litigation and government investigations
  • Currency movements can hinder

The average rating of stock market analysts:

Buy

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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