According to the company’s website news release on November 10, 2022,
Revenue and EPS summary
YTD 2022 Financial performance (growth numbers and commentary at CER5 )
- Total Revenue increased 37% to $33,144m, with growth coming from all disease areas, and from the addition of Alexion, which was incorporated into the Group’s results from 21 July 2021
- Oncology Total Revenue increased 24%, inclusive of milestone payments from MSD6 for Lynparza. Oncology Product Sales increased 20%. Total Revenue from R&I7 increased 4%, CVRM8 increased 19%9 and Rare Disease increased 10%9
- Core Gross Margin of 81%, up six percentage points at CER, reflecting the lower revenue from initial Vaxzevria contracts and the increased share of specialty care medicines
- Core Total Operating Expense increased 26%, reflecting the addition of Alexion, continued investment in new launches and the pipeline, to deliver sustainable long-term growth ‒ Core Operating Margin of 32%, up six percentage points at CER, benefitting from favourable phasing and product mix ‒ Core EPS increased 52% to $5.28
- FY 2022 Core EPS at constant exchange rates now expected to increase by a high twenties to low thirties percentage, vs previous guidance of a mid-to-high twenties increase. At actual exchange rates, FY 2022 Core EPS growth is anticipated to be impacted by a currency headwind10 of a mid-to-high single-digit percentage, versus previous guidance of a mid single-digit headwind
Key milestones achieved since the prior results
- Key data: Positive Phase III read-outs for danicopan in PNH-EVH11 (ALPHA) and for capivasertib in 2nd-line HR-positive, metastatic breast cancer (CAPItello-291)
- Key regulatory approvals: 19 approvals in major markets since H1 2022 results, including US approvals for Enhertu in HER212 -low breast cancer (DESTINY-Breast04) and advanced NSCLC13 (DESTINY-Lung02), Imjudo and Imfinzi in advanced liver cancer (HIMALAYA), Imfinzi in advanced biliary tract cancer (TOPAZ-1); EU approval for Beyfortus for the prevention of RSV14 lower respiratory tract disease (MELODY/MEDLEY); EU and Japan approvals for Ultomiris in gMG15 (CHAMPION-MG), Tezspire in severe asthma (NAVIGATOR) and Lynparza in early breast cancer (OlympiA)
- Other regulatory milestones: US Priority Review for Lynparza for 1st-line metastatic castration-resistant prostate cancer (PROpel) Pascal Soriot, Chief Executive Officer, AstraZeneca, said: “AstraZeneca continues to see the benefit of our sustained investment in R&D, with 19 major regulatory approvals since our last earnings call.
Pascal Soriot, Chief Executive Officer, AstraZeneca, said:
“AstraZeneca continues to see the benefit of our sustained investment in R&D, with 19 major regulatory approvals since our last earnings call.
After a strong performance in the year to date, we have increased our Core EPS guidance for the full year 2022. Additionally, recent encouraging data for several of our pipeline programmes have given us the confidence to proceed with additional late-stage clinical trials as we maintain our focus on delivery of our growth ambitions.
I would also like to highlight the announcement at COP27 to accelerate the delivery of our net zero strategy. Our company intends to lead by example on this increasingly important objective for the world.”
Guidance
The Company updates its FY 2022 guidance at CER, due to the strong performance in the year to date. The guided range for FY 2022 Core EPS has been increased to a high twenties to low thirties percentage; the final outcome within that range will depend on the timing of Evusheld deliveries and collaboration milestones linked to regulatory events.
At actual exchange rates, it is anticipated that FY 2022 Total Revenue growth will also be impacted by a currency headwind of a mid single-digit percentage, and that FY 2022 Core EPS growth will be impacted by a currency headwind of a mid-to-high single-digit percentage (see ‘Currency impact’, below).
Other elements of the Income Statement are expected to be broadly in line with the indications issued in the Company’s H1 2022 results announcement (29 July 2022).
AstraZeneca continues to recognise geopolitical and supply chain uncertainties on overall business performance. Variations in performance between quarters can be expected to continue.
The Company is unable to provide guidance 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.
Currency impact
The growth numbers in the guidance above are provided at CER, based on the average exchange rates through 2021.
If foreign-exchange rates for November to December 2022 were to remain at the spot rates seen on 31 October 2022, it is anticipated that FY 2022 Total Revenue would incur a mid single-digit adverse impact versus the performance at CER, and FY 2022 Core EPS would incur a mid-to-high single-digit adverse impact (previously a mid single-digit adverse impact).
Corporate and business development
In October 2022, AstraZeneca entered a definitive agreement to acquire LogicBio Therapeutics, Inc. (NASDAQ: LOGC), a pioneering genomic medicine company. The proposed acquisition aims to rapidly accelerate Alexion’s growth in genomic medicines through LogicBio’s unique technology, experienced rare disease R&D team, and expertise in pre-clinical development.
Sustainability summary
AstraZeneca attended COP27, where the Sustainable Markets Initiative Health Systems Task Force collectively made significant commitments to tackle the climate crisis, setting a benchmark for others to drive action at scale. Some commitment highlights include supply chain emissions, which drive approximately 50% of healthcare emissions: the Task Force members have committed to align on a set of common supplier standards and jointly explore green transportation corridors. The patient care pathway drives approximately 45% of healthcare emissions, and the Task Force has committed to build an end-to-end care pathway emissions standard to measure emissions across the care pathway, as well as align and publish product-level lifecycle management assessment data to increase transparency on emissions. The Task Force has also committed to leverage digital health solutions to decarbonise clinical trials.
Conference call
A conference call and webcast for investors and analysts will begin, 10 November 2022, at 11:45 GMT. Details can be accessed via astrazeneca.com.
Reporting calendar
The Company intends to publish its full year and fourth quarter results on Thursday 9 February 2023.
Operating and financial review
All narrative on growth and results in this section is based on actual exchange rates, and financial figures are in US$ millions ($m), unless stated otherwise. Unless stated otherwise, the performance shown in this announcement covers the nine-month period to 30 September 2022 (‘the year to date’ or ‘YTD 2022’) compared to the nine-month period to 30 September 2021 (YTD 2021), or the three-month period to 30 September 2022 (‘the quarter’ or ‘Q3 2022’) compared to the three-month period to 30 September 2021 (Q3 2021).
Core financial measures, EBITDA, Net Debt, CER, Initial Collaboration Revenue and Ongoing Collaboration Revenue are non-GAAP financial measures because they cannot be derived directly from the Group’s Interim financial statements. Management believes that these non-GAAP financial measures, when provided in combination with Reported results, provide investors and analysts with helpful supplementary information to understand better the financial performance and position of the Group on a comparable basis from period to period. These non-GAAP financial measures are not a substitute for, or superior to, financial measures prepared in accordance with GAAP.
Core financial measures are adjusted to exclude certain significant items, such as:
- Amortisation and impairment of intangible assets, including impairment reversals but excluding any charges relating to IT assets
- Charges and provisions related to restructuring programmes, which includes charges that relate to the impact of restructuring programmes on capitalised IT assets as well as Post Alexion Acquisition Group Review items
- Alexion acquisition-related items, primarily fair value adjustments on acquired inventories and fair value impact of replacement employee share awards
- Other specified items, principally the imputed finance charge relating to contingent consideration on business combinations, legal settlements and the one off deferred tax credit arising from the internal reorganisation to integrate Alexion
- The tax effects of the adjustments above are excluded from the Core Tax charge
Details on the nature of Core financial measures are provided on page 54 of the Annual Report and Form 20-F Information 2021.
Reference should be made to the Reconciliation of Reported to Core financial measures table included in the financial performance section in this announcement.
Gross Margin, previously termed Gross Profit Margin, is the percentage by which Product Sales exceeds the Cost of sales, calculated by dividing the difference between the two by the sales figure. The calculation of Reported and Core Gross Margin excludes the impact of Collaboration Revenue and any associated costs, thereby reflecting the underlying performance of Product Sales.
EBITDA is defined as Reported Profit before tax after adding back Net Finance Expense, results from Joint Ventures and Associates and charges for Depreciation, Amortisation and Impairment. Reference should be made to the Reconciliation of Reported Profit before tax to EBITDA included in the financial performance section in this announcement.
Net Debt is defined as Interest-bearing loans and borrowings and Lease liabilities, net of Cash and cash equivalents, Other investments, and net derivative financial instruments. Reference should be made to Note 3 ‘Net Debt’ included in the Notes to the Interim financial statements in this announcement. Ongoing Collaboration Revenue is defined as Collaboration Revenue excluding Initial Collaboration Revenue (which is defined as Collaboration Revenue that is recognised at the date of completion of an agreement or transaction, in respect of upfront consideration).
Ongoing Collaboration Revenue comprises, among other items, royalties, milestone revenue and profit-sharing income. Reference should be made to the Collaboration Revenue table in this Operating and financial review.
The Company strongly encourages investors and analysts not to rely on any single financial measure, but to review AstraZeneca’s financial statements, including the Notes thereto, and other available Company reports, carefully and in their entirety.
Due to rounding, the sum of a number of dollar values and percentages in this announcement may not agree to totals.
Oncology
Oncology Total Revenue increased by 19% (24% at CER) in YTD 2022 to $11,493m and represented 35% of overall Total Revenue (YTD 2021: 38%). This included Lynparza Collaboration Revenue of $250m (YTD 2021: $nil) and Enhertu Collaboration Revenue of $335m (YTD 2021: $137m). Product Sales increased by 14% (20% at CER) in YTD 2022 to $10,885m, reflecting new launches and increased patient access for Tagrisso, Imfinzi, Lynparza and Calquence partially offset by declines in some older medicines. Oncology Total Revenue grew 20% (27% at CER) in Q3 benefiting from new launches for Imfinzi, Calquence and Enhertu and improvement in rates of lung cancer diagnosis and treatment.
Orpathys
Orpathys Total Revenue of $35m in the year to date (YTD 2021: $10m), growth was driven by the 2021 launch in China, where it is approved for patients with lung cancer and MET44 gene alterations.
BioPharmaceuticals
Including Vaccines & Immune Therapies medicines, BioPharmaceuticals Total Revenue increased by 16% (21% at CER) in YTD 2022 to $15,078m, representing 45% of overall Total Revenue (YTD 2021: 51%). Growth was driven by strong Farxiga performance and growth in Evusheld.
Cardiovascular, Renal & Metabolism
CVRM Total Revenue increased by 13% (19% at CER) to $6,927m in YTD 2022, driven by a strong Farxiga performance, and represented 21% of overall Total Revenue (YTD 2021: 24%).
Lokelma
Lokelma Total Revenue increased 71% (80% at CER) to $208m in YTD 2022, driven by Lokelma extending its branded market share lead in the US and also achieving total potassium binder market share leadership in the period. Continued progress in Europe from recent launches across the region where Lokelma extended its market share in the period. In China, Lokelma admitted to the NRDL with effect from 1 January 2022.
Andexxa
On a pro forma basis, Andexxa Total Revenue increased 17% (24% at CER) to $121m.
Roxadustat
Total Revenue increased 2% (4% at CER) to $151m. Total Revenue also increased quarter-on-quarter, with roxadustat benefitting from increased volumes in China following NRDL price cuts.
Respiratory & Immunology
Total Revenue from R&I medicines was stable in YTD 2022 (increased 4% at CER) at $4,478m and represented 14% of overall Total Revenue (YTD 2021: 18%). In the third quarter, R&I Total Revenue grew 5% at CER primarily driven by the performance of recent launch brands, including Fasenra, Tezspire, Breztri and Saphnelo, and revenue milestones; this growth more than offset the sustained erosion of Pulmicort revenue following its inclusion in VBP in China in Q4 2021, and a marginal decline in Symbicort revenue.
Saphnelo
Total Revenue of $69m in the year to date (YTD 2021: $1m) was driven by sales acceleration in the US, where Saphnelo achieved NBRx leadership in the i.v.60 segment for SLE61 and received a permanent J-code facilitating reimbursement. Growth was further supported by a strong launch in Germany and steady growth in Japan.
Tezspire
Tezspire is approved in the US, EU and Japan for the treatment of severe asthma without biomarker or phenotypic limitation. Total Revenue of $42m in the year to date (YTD 2021: $nil) was comprised entirely of Collaboration Revenue, and reflected the strong early launch performance in the US. Amgen records sales in the US and AstraZeneca records its share of gross profits in the US as Collaboration Revenue.
Rare Disease
On a pro forma basis, Total Revenue from Rare Disease medicines increased by 4% (10% at CER) in YTD 2022 to $5,236m, representing 16% of overall Total Revenue.
Performance was driven by the durability of the C5 franchise, Soliris and Ultomiris, following Ultomiris gMG launch and expansion into new markets, and continued Soliris NMOSD growth.
Strensiq and Koselugo performances were driven by continued patient demand and market expansion efforts, respectively.
These tables show pro forma growth rates for each of the medicines acquired with Alexion, calculated by comparing YTD 2022 revenues with the medicine’s revenues from 1 January 2021 to 30 September 2021.
Gross Profit
The Gross Margin (Reported and Core) in the year to date was impacted by:
- Positive mix effects: the increased contribution from Rare Disease and Oncology medicines had a positive impact on the Gross Margin
- Negative mix effects: sales of Vaxzevria and medicines with profit-sharing arrangements (primarily Lynparza) had a dilutive impact on the Gross Margin
- Pricing pressure relating to procurement programmes in China
- Reported Gross Profit was also impacted by the unwind of the fair value adjustment to Alexion inventories at the date of acquisition. The fair value uplift is expected to unwind through Reported Cost of Sales in line with associated revenues, and in YTD 2022, the impact of the fair value uplift unwind on Cost of Sales was $3,175m (YTD 2021: $1,044m)
- Currency fluctuations had a small positive impact on Gross Margin in the year to date. Currency fluctuations may have a positive or negative impact on Gross Margin in future quarters
- Variations in Gross Margin performance between periods can be expected to continue
R&D Expense
Reported and Core R&D Expense was impacted by:
- The acquisition of Alexion in July 2021 ‒ Recent positive data read outs for several high priority medicines that ungated late-stage Oncology trials
- The advancement of a number of mid-stage clinical development programmes in BioPharmaceuticals
- Investment in platforms, new technology and capabilities to enhance R&D productivity
The decrease in Reported R&D Expense is primarily due to the prior year including an impairment charge of $1,172m, recognised in Q3 2021 on an intangible asset related to the acquisition of Ardea Biosciences, Inc.
SG&A Expense
The increase in Reported and Core SG&A Expense was driven by:
- The acquisition of Alexion
- Market development activities for recent launches
Reported SG&A Expense was also impacted by amortisation of intangible assets related to the Alexion acquisition and other acquisitions and collaborations, and a $775m legal settlement with Chugai
Other Operating Income
- Reported Other Operating Income of $325m consisted primarily of royalties and disposal proceeds on small divestments, including the divestment of rights to Plendil in the second quarter
- In YTD 2021, Reported Other Operating Income of $1,345m included $776m of divestment gains from AstraZeneca’s share of Viela Bio, Inc. and $309m from the commercial rights to Crestor in over 30 countries in Europe (excluding UK and Spain)
Net Finance Expense
- The increase in Reported and Core Net Finance Expense in the year to date was driven by financing costs on debt for the Alexion transaction , with a reduction in the discount unwind on acquisition-related liabilities, including the Diabetes Alliance which impacted Reported Net Finance Expense
- In Q3 2022, the Net Finance Expense was also impacted by rising interest rates
Taxation
- The effective Reported Tax Rate for the nine months to 30 September 2022 was (39%) and the Core tax rate was 18%, and (24%) and 17% respectively in the nine months to 30 September 2021
- The Reported Tax Rate for the nine months included a one-time favourable net adjustment of $883m to deferred taxes arising from an internal reorganisation to integrate the Alexion organisation which took place in the quarter. The legal entity reorganisation did not result in any corporate income tax payable however did result in an estimated one-off deferred tax adjustment of $883m at Q3 to reflect the substantively enacted tax effects which would arise in impacted jurisdictions going forwards. A further $47m credit movement is included in OCI. This adjustment is based upon full-year forecast estimates and therefore may change for the full year results. This adjustment was excluded from the Core tax charge ‒ 2021 Reported and Core Tax Rates were impacted by one-off items in 2021, including the non-taxable gain on the divestment of Viela and updates to estimates of prior period tax liabilities following settlements with tax authorities
- The net cash paid for the year to date was $1,335m (YTD 2021: $1,198m) representing 77% of Reported Profit before tax (YTD 2021: 323%). The cash tax amount increased due to the increase in profits and the impact of Non-core charges on the level of Reported Profit before tax and effects of US rules around deferral of tax relief on R&D costs. The cash tax rate decreased compared to 2021 due to the impact in YTD 2021 of low Reported Profit before tax
- The Reported Tax rate of (39%) was lower than the Core Tax Rate of 18% primarily due to the impact of the aforementioned internal restructuring. YTD 2022 Reported and Core Tax rates also benefited from the geographical mix of profits and favourable adjustments to prior year tax liabilities in a number of major jurisdictions
- On 20 July 2022, the UK Government issued draft legislation in relation to the new global minimum tax framework, expected to be brought into effect in the UK from 2024. The UK corporation tax rate continues to be expected to increase to 25%, effective April 2023. The Company is currently assessing potential impact of these draft rules upon its financial statements
Cash Flow summary
The increase in Net Cash Inflow from Operating Activities of $2,865m primarily reflected an underlying improvement in business performance, including the contribution from Alexion.
The Reported Operating Profit of $2,663m in the period includes a negative impact of $3,175m relating to the unwind of the inventory fair value uplift recognised on the acquisition of Alexion. This is offset by a corresponding item (positive impact of $3,175m) in Decrease in Working Capital and Short-term Provisions. Overall, the unwind of the fair value uplift has no impact on Net Cash Inflow from Operating Activities.
The change in Working Capital and Short-term Provisions of $1,395m, whilst being positively impacted by the aforementioned inventory fair value uplift unwind, has been adversely impacted by the reduction of Vaxzevria working capital balances predominantly within Trade and other payables.
Capital Expenditure
Capital Expenditure amounted to $719m in the year to date (YTD 2021: $768m) including expenditure relating to Alexion. The Company anticipates stable Capital Expenditure in FY 2022 relative to FY 2021.
Net Debt summary
Net Debt increased by $220m in the year to date to $24,542m. Details of the committed undrawn bank facilities are disclosed within the going concern section of Note 1. Details of the Company’s solicited credit ratings are disclosed in Note 3.
Capital allocation
The Board’s aim is to continue to strike a balance between the interests of the business, financial creditors and the Company’s shareholders. The Company’s capital allocation priorities include investing in the business and pipeline, maintaining a strong, investment-grade credit rating, potential value-enhancing business development opportunities, and supporting the progressive dividend policy.
In approving the declaration of dividends, the Board considers both the liquidity of the company and the level of reserves legally available for distribution. Dividends are paid to shareholders from AstraZeneca PLC, a Group holding company with no direct operations. The ability of AstraZeneca PLC to make shareholder distributions is dependent on the creation of profits for distribution and the receipt of funds from subsidiary companies. The consolidated Group reserves set out in the Condensed consolidated statement of financial position do not reflect the profit available for distribution to the shareholders of AstraZeneca PLC.
Summarised financial information for guarantee of securities of subsidiaries
AstraZeneca Finance LLC (“AstraZeneca Finance”) is the issuer of 0.700% Notes due 2024, 1.200% Notes due 2026, 1.750% Notes due 2028 and 2.250% Notes due 2031 (the “AstraZeneca Finance Notes”). Each series of AstraZeneca Finance Notes has been fully and unconditionally guaranteed by AstraZeneca PLC. AstraZeneca Finance is 100% owned by AstraZeneca PLC and each of the guarantees by AstraZeneca PLC is full and unconditional and joint and several.
The AstraZeneca Finance Notes are senior unsecured obligations of AstraZeneca Finance and rank equally with all of AstraZeneca Finance’s existing and future senior unsecured and unsubordinated indebtedness. The guarantee by AstraZeneca PLC of the AstraZeneca Finance Notes is the senior unsecured obligation of AstraZeneca PLC and ranks equally with all of AstraZeneca PLC’s existing and future senior unsecured and unsubordinated indebtedness. Each guarantee by AstraZeneca PLC is effectively subordinated to any secured indebtedness of AstraZeneca PLC to the extent of the value of the assets securing such indebtedness. The AstraZeneca Finance Notes are structurally subordinated to indebtedness and other liabilities of the subsidiaries of AstraZeneca PLC, none of which guarantee the AstraZeneca Finance Notes.
AstraZeneca PLC manages substantially all of its operations through divisions, branches and/or investments in subsidiaries and affiliates. Accordingly, the ability of AstraZeneca PLC to service its debt and guarantee obligations is also dependent upon the earnings of its subsidiaries, affiliates, branches and divisions, whether by dividends, distributions, loans or otherwise.
Foreign exchange
The Company’s transactional currency exposures on working-capital balances, which typically extend for up to three months, are hedged where practicable using forward foreign-exchange contracts against the individual companies’ reporting currency. Foreign-exchange gains and losses on forward contracts for transactional hedging are taken to profit or loss. In addition, the Company’s external dividend payments, paid principally in pounds sterling and Swedish krona, are fully hedged from announcement to payment date.
