AstraZeneca beats expectations and raises guidance despite China troubles

AstraZeneca has exceeded market expectations with its third-quarter earnings and raised its outlook for the 2024 fiscal year, driven by strong demand for its cancer treatment therapy.

This marks the second consecutive quarter the British pharmaceutical giant has upgraded its guidance following an earnings beat in the previous quarter.

Upbeat third-quarter earnings

The company reported core earnings per share of $2.08 (€1.96) on total revenue of $13.57bn (€12.77bn), marking a year-on-year increase of 20% and 18% respectively at constant exchange rates (CER), up from 15% and 17% in the previous quarter. Sales in its oncology division remained the largest revenue contributor, increasing by 22% year-on-year.

CEO Pascal Soriot commented: "We are highly encouraged by the broad-based momentum we are seeing across our company in 2024, with growth set to continue through 2025, providing a solid foundation for our 2030 ambitions."

Addressing the situation in China, he added: "We take the matters in China very seriously and, if requested, will fully cooperate with the authorities. We remain committed to delivering innovative, life-changing medicines to patients in China."

In the previous quarter, AstraZeneca set a new revenue target of $80bn (€73.8bn) by 2030. "This reflects the substantial growth potential we see from both our approved medicines and those in our late-stage pipeline", Soriot said.

Since taking the helm in 2012, Soriot has prioritised cancer treatment, a strategy that has proven successful for the British firm.

The company raised its expectations for both total revenue growth and core earnings per share (EPS) to a high-teens percentage from the mid-teens percentage predicted in the previous quarter. Initially, the growth outlook had been set at a low double-digit to low-teens percentage.

China's Legal Troubles

Despite positive earnings, some analysts believe China's investigation into AstraZeneca could continue to weigh on its share price.

The company's shares saw their largest one-day drop since 2020 following reports on 5 November that Leon Wang, AstraZeneca's China President, was under investigation.

AstraZeneca's shares have since plunged 25% from their all-time high in early September, amid concerns over trial results for its experimental lung cancer drug and ongoing legal issues in China.

The investigation reportedly involves allegations of misconduct in sales tactics, smuggling of immunotherapy treatments, and insurance fraud, which has spooked investors.

Sales in China rose by 15% to $1.67bn (€1.57bn), accounting for 12% of total revenue. While the US remains AstraZeneca's largest market, generating $6bn (€5.65bn) in third-quarter revenue, China's growth rate was notably slower compared to 23% in the US and 22% in the EU.

AstraZeneca stated: "As previously disclosed, the company is aware of a number of individual investigations by the Chinese authorities into current and former AstraZeneca employees.

"To the best of the Company's knowledge, the investigations include allegations of medical insurance fraud, illegal drug importation, and personal information breaches. Recently, Leon Wang, Executive Vice President for International and AstraZeneca China President, was detained. The Company has not received any notification that it is itself under investigation. If requested, AstraZeneca will fully cooperate with the Chinese authorities."