On April 30, 2021 AstraZeneca delivered robust revenue growth of 15% (11% at CER1) in the quarter to $7,320m; excluding the contribution from the pandemic COVID-19 vaccine, revenue growth increased by 11% (7% at CER) to $ (Press release, AstraZeneca, APR 30, 2021, View Source [SID1234578820]).
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The overall results in the quarter further increased the Company’s profitability and cash generation, while the pipeline demonstrated encouraging progress; the Company reiterates full-year 2021 guidance. Pascal Soriot, Chief Executive Officer, commented: "We delivered solid progress in the first quarter of 2021 and continued to advance our portfolio of life-changing medicines. Oncology grew 16% and New CVRM grew 15%. New medicines contributed over half of revenue and all regions delivered encouraging growth.
This performance ensured another quarter of strong revenue and earnings progression, continued profitability, and cash-flow generation, despite the pandemic’s ongoing negative impact on the diagnosis and treatment of many conditions. Given the performance in the first quarter, in line with our expectations, we reiterate our full-year guidance. We expect the impact of COVID to reduce and anticipate a performance acceleration in the second half of 2021. Further significant pipeline advances were achieved as we continued to invest for long-term sustainable growth, including the OlympiA Phase III trial demonstrating Lynparza’s benefit for certain forms of early breast cancer. This sustained pipeline progress and accelerating business performance underlines our commitment to patients and delivering our growth potential, which will be further complemented by the proposed acquisition of Alexion."
Highlights of Total Revenue in the quarter included:-An increase in Product Sales of 15% (11% at CER) to $7,257m. New medicines 7 Total Revenue improved by 30% (26% at CER) in the quarter to $3,891m, including growth in Emerging Markets of 33% (30% at CER) to $874m. Globally, new medicines represented 53% of Total Revenue (Q1 2020: 47%). Q1 2020 benefitted from a low-to-mid single-digit percentage increase in sales following short-term inventory increases in the distribution channel, an indirect effect of the COVID-19 pandemic-Oncology growth of 20% (16% at CER) to $3,024m, an increase in New CVRM8 of 19% (15% at CER) to $1,306m. Respiratory & Immunology (R&I), however, declined by 1% (4% at CER) to $1,546m, predominately reflecting the impact of stocking of an authorised generic version of Symbicort in the US during Q1 2020 and phasing of COVID-19
-An increase in Emerging Markets of 14% (10% at CER) to $2,592m, with China growth of 19% (10% at CER) to $1,679m. In the US, Total Revenue increased by 10% to $2,310m and in Europe by 28% (18% at CER) to $1,546mThe guidance does not incorporate any revenue or profit impact from sales of the pandemic COVID-19 vaccine. Similarly, the guidance excludes the proposed acquisition of Alexion Pharmaceuticals, Inc. (Alexion) which is intended to become AstraZeneca’s rare disease unit and area of expertise. The acquisition is anticipated to close in Q3 2021. AstraZeneca recognises the heightened risks and uncertainties from the impact of COVID19. Variations in performance between quarters can be expected to continue. The Company is unable to provide guidance and indications on a Reported basis because AstraZeneca cannot reliably forecast material elements of the Reported result, including any fair value adjustments arising on acquisition-related liabilities, intangible asset impairment charges and legal-settlement provisions. Please refer to the cautionary statements section regarding
forward-looking statements at the end of this announcement. Indications The Company provides indications for FY 2021 at CER:
-AstraZeneca continues its focus on improving operating leverage, while addressing its most important capital-allocation priority of re-investment in the business, namely continued investment in R&D and the support of medicines and patient access in key markets
-A Core Tax Rate of 18-22%. Variations in the Core Tax Rate between quarters are anticipated to continue Currency impact If foreign-exchange rates for April to December 2021 were to remain at the average of rates seen in the quarter, it is anticipated that there would be a low single-digit favourable impact on Total Revenue and Core EPS.
The Company’s foreign-exchange rate sensitivity analysis is contained within the operating and financial review. Financial summary-Total Revenue, comprising Product Sales and Collaboration Revenue, increased by 15% in the quarter (11% at CER) to $7,320m. Product Sales grew by 15% (11% at CER) to $7,257m, driven primarily by the performances of new medicines across Oncology and BioPharmaceuticals, including Tagrisso and Farxiga. Total Revenue included $275m of pandemic COVID-19 vaccine sales-The Reported Gross Profit Margin9 declined by three percentage points to 74.3%, and the Core Gross Profit9 Margin declined by three percentage points in the quarter to 74.6%.
The performance predominantly reflected the significant impact of equitable supply, at no profit to AstraZeneca, of the pandemic COVID-19 vaccine, together with an increasing contribution from profit-sharing arrangements, primarily Lynparza, and the impact of the Chinese National Reimbursement Drug List (NRDL) and the volume-based procurement (VBP) patient-access programmes. A higher proportion of Oncology sales and increasing patient access in China partially offsets these impacts. These variations in gross margin performance between quarters can be expected to continue-
Reported Total Operating Expense increased by 13% (9% at CER) in the quarter to $4,741m and represented 65% of Total Revenue (Q1 2020: 66%). Core Total Operating Expense increased by 15% (11% at CER) to $4,136m and comprised 57% of Total Revenue (Q1 2020: 57%
)-Reported and Core R&D Expense increased by 24% (19% at CER) in the quarter to $1,713m and by 23% (18% at CER) to $1,638m, respectively. The increases primarily reflected the investment in Phase III and the advancement to Phase II of several clinical development programmes, particularly in BioPharmaceuticals. The Company continued to invest in its COVID-19 vaccine and potential medicines to prevent and treat COVID-19 Reported SG&A Expense increased by 8% (4% at CER) in the quarter to $2,929m; Core SG&A Expense increased by 10% (7% at CER) to $2,399m, representing 33% of Total Revenue (Q1 2020: 34%)-Reported Other Operating Income and Expense10 grew by 146% (145% at CER) in the quarter to $1,180m. Core Other Operating Income and Expense increased by 147% (146% at CER) to $1,180m during the period.
The growth predominately reflected the $776m of income from divestment of AstraZeneca’s 26.7% share of Viela Bio, Inc. (Viela) as part of the acquisition by Horizon Therapeutics plc-The Reported Operating Profit Margin increased by seven percentage points in the quarter (eight at CER) to 26%; the Core Operating Profit Margin increased by five percentage points (six at CER) to 34%. The performance predominately reflected the aforementioned one-time benefit from Other Operating Income and Expense10-Reported EPS of $1.19 in the quarter represented an increase of 100% (97% at CER). Core EPS grew by 55% (53% at CER) to $1.63. EPS benefitted from a lower tax rate as a result of a non-taxable gain from the divestment of AstraZeneca’s share of VielaEmerging Markets Total Revenue increased by 14% in the quarter (10% at CER) to $2,592m, however, the performance was offset by the decline of Pulmicort, which included an adverse impact of four percentage points (four at CER) and suppressed the overall Total Revenue growth in the quarter.
China increased 19% (10% at CER) to $1,679m in the quarter and comprised 65% of Emerging Markets Total Revenue. New medicines, primarily driven by Tagrisso in Oncology and Forxiga in New CVRM, delivered particularly encouraging growth. The Total Revenue growth in the quarter, however, included an adverse impact of five percentage points (four at CER) from the reduced sales of Pulmicort which, restricted overall revenue growth in the quarter. Ex-China Total Revenue increased 6% (11% at CER) to $913m, with a particularly strong performance in Middle East and Africa.
Business development Acquisition of Acerta Pharma B.V. (Acerta) shares In December 2015, the Company agreed to acquire 55% of the entire issued share capital of Acerta for an upfront payment of $2.5bn, which was paid in 2016. A further amount of $1.5bn was paid in 2017 on receipt of the first US regulatory approval for Calquence. The agreement included options that, if exercised, provided the opportunity for Acerta shareholders to sell, and AstraZeneca to buy, the remaining 45% of shares in Acerta. The final condition for these options to be exercised was satisfied in November 2020 when Calquence received EU marketing authorisation. AstraZeneca exercised its option to acquire the remaining 45% of shares in Acerta in April 2021.
The agreement initially provided that the remaining 45% of shares in Acerta would be acquired at a price of approximately $3bn net of certain costs and payments incurred by AstraZeneca and net of agreed future adjusting items, using a pre-agreed pricing mechanism. In October 2019, an amendment agreement came into effect which was disclosed as part of year-to-date and Q3 2019 results, changing the timing of payments and reducing the maximum consideration required to be made to acquire the remaining outstanding shares of Acerta if the options were exercised. The payments are to be made in similar annual instalments in 2022, 2023 and 2024.
The changes to the terms were reflected in the assumptions that were used to calculate the amortised cost of the option liability as of 31 March 2021 of $2,336m. Sustainability summary Recent developments and progress against the Company’s sustainability priorities are reported below: a) Access to healthcare AstraZeneca and its sublicensee, Serum Institute of India Pvt. Ltd. (SII), delivered over 48 million doses of its pandemic COVID-19 vaccine to more than 120 countries through COVAX11, the multilateral facility co-led by Gavi, the Vaccine Alliance, the Coalition for Epidemic Preparedness Innovations, and the World Health Organization (WHO), with c.80% of the doses going to low and middle-income countries. b) Environmental protection During the period, the Company was recognised for its leadership in building sustainable business models, as one of the top 7% of companies on CDP’s 2020 Supplier Engagement Rating Leaderboard. By working with suppliers to reduce their emissions, AstraZeneca is helping to drive science-based climate action across the value chain, a key component of the Company’s Ambition Zero Carbon strategy.) Ethics and transparency The Company released its seventh annual Sustainability Report and Sustainability Data Summary via its website and social media.
The report was released in conjunction with the Annual Report and Form 20-F Information 2020. The report outlined progress and challenges and aims for the future. A more extensive sustainability update is provided later in this announcement