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阿斯利康(US ADR)(AZN) - 2023 Q2 - Quarterly Report

Performance Overview Financial Performance Summary H1 2023 total revenue grew 4% to $22.295 billion (CER), with Core EPS up 21% to $4.07, driven by non-COVID-19 therapeutic areas | Metric | H1 2023 | YoY Change (CER) | Q2 2023 | YoY Change (CER) | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $22.295 billion | +4% | $11.416 billion | +9% | | Total Revenue (excluding COVID-19 medicines) | $21.961 billion | +16% | $11.237 billion | +17% | | Reported EPS | $2.34 | >6 times | $1.17 | >9 times | | Core EPS | $4.07 | +21% | $2.15 | +38% | - All non-COVID-19 therapeutic areas achieved double-digit revenue growth: Oncology grew 22%, Cardiovascular, Renal & Metabolism (CVRM) grew 20%, Respiratory & Immunology (R&I) grew 10%, and Rare Disease grew 12%4 - Core product sales gross margin increased by three percentage points to 83%, primarily due to decreased sales of lower-margin COVID-19 medicines and a continued shift in product mix towards specialty medicines4 - Eight medicines generated over $1 billion in revenue in H1, with Ultomiris, Imfinzi/Imjudo, and Farxiga revenues growing 64%, 57%, and 40% respectively5 Full-Year Guidance The company reaffirms FY2023 guidance for total revenue and Core EPS growth, with an upward revision for China revenue growth, excluding COVID-19 medicines | Guidance Item | FY2023 Outlook (CER) | | :--- | :--- | | Total Revenue Growth | Low to mid-single-digit percentage | | Total Revenue Growth (excluding COVID-19 medicines) | Low double-digit percentage | | Core EPS Growth | High single-digit to low double-digit percentage | | China Total Revenue Growth | Low to mid-single-digit percentage (previously low single-digit) | | Core Operating Expense Growth | Low to mid-single-digit percentage | - Total revenue from COVID-19 medicines (Vaxzevria and COVID-19 mAbs) is expected to decline significantly in FY20237 - Assuming average exchange rates from June 2023, total revenue is expected to be adversely impacted by a low single-digit percentage, and Core EPS by a low to mid-single-digit percentage in FY20237 Key Milestones and Sustainability The company achieved significant R&D and regulatory milestones, including positive trial data for datopotamab deruxtecan and key approvals for Lynparza and Farxiga, while committing an additional $400 million to the AZ Forest program - Positive R&D pipeline progress includes key trial results for datopotamab deruxtecan (TROPION-Lung01), Tagrisso (FLAURA2), and Lynparza + Imfinzi (DUO-E)510 - Multiple important regulatory approvals were secured, such as Lynparza in the US for BRCA-mutated prostate cancer, Farxiga in the US for heart failure with preserved ejection fraction, and Enhertu in China for HER2-low breast cancer610 - As part of its "Ambition Zero Carbon" sustainability plan, the company announced a $400 million investment in the AZ Forest program, committing to plant 200 million trees by 2030517 Operating and Financial Review Total Revenue Analysis H1 2023 total revenue reached $22.295 billion, growing 4% (CER), with Oncology, Rare Disease, and CVRM as key drivers, and strong performance in the US and Emerging Markets | Revenue Type (H1 2023) | Amount (billion USD) | Share | YoY Change (CER) | | :--- | :--- | :--- | :--- | | Product Sales | $21.448 | 96% | +3% | | Alliance Revenue | $0.627 | 3% | >2 times | | Collaboration Revenue | $0.220 | 1% | -15% | | Total Revenue | $22.295 | 100% | +4% | | Therapeutic Area (H1 2023) | Amount (billion USD) | Share | YoY Change (CER) | | :--- | :--- | :--- | :--- | | Oncology | $8.794 | 39% | +22% | | BioPharmaceuticals | $9.051 | 41% | -9% | | - CVRM | $5.239 | 24% | +20% | | - R&I | $3.180 | 14% | +10% | | - V&I | $0.632 | 3% | -76% | | Rare Disease | $3.819 | 17% | +12% | | Other Medicines | $0.631 | 3% | -22% | | Region (H1 2023, excluding COVID-19 medicines) | Amount (billion USD) | Share | YoY Change (CER) | | :--- | :--- | :--- | :--- | | US | $9.081 | 41% | +16% | | Emerging Markets | $6.074 | 28% | +22% | | - China | $3.043 | 14% | +9% | | - Emerging Markets (excluding China) | $3.031 | 14% | +38% | | Europe | $4.356 | 20% | +13% | | Established Rest of World | $2.450 | 11% | +8% | Oncology Business H1 2023 Oncology revenue grew 22% (CER) to $8.794 billion, driven by strong performance of Imfinzi, Enhertu, and Calquence, with Tagrisso maintaining steady growth | Key Oncology Medicine (H1 2023) | Total Revenue (billion USD) | YoY Change (CER) | Key Drivers | | :--- | :--- | :--- | :--- | | Tagrisso | $2.915 | +12% | Increased global demand in adjuvant and first-line settings | | Imfinzi | $1.976 | +57% | Successful launches in new indications like hepatocellular carcinoma (HCC) and biliary tract cancer (BTC) | | Lynparza | $1.368 | -4% | Impacted by a $175 million milestone payment in the prior year, product sales grew 10% | | Enhertu (Alliance Revenue) | $0.475 | >2 times | Rapid adoption as a new standard of care in indications like HER2-low breast cancer | | Calquence | $1.185 | +33% | Increased global penetration, becoming a leading BTK inhibitor in key markets | BioPharmaceuticals Business H1 2023 BioPharmaceuticals revenue decreased 9% (CER) to $9.051 billion, primarily due to a significant reduction in COVID-19 medicine sales, while CVRM and R&I showed robust growth Cardiovascular, Renal & Metabolism (CVRM) CVRM business H1 revenue reached $5.239 billion, growing 20% (CER), with Farxiga as the main growth engine due to strong demand in heart failure and chronic kidney disease indications | CVRM Key Medicine (H1 2023) | Total Revenue (billion USD) | YoY Change (CER) | | :--- | :--- | :--- | | Farxiga | $2.834 | +40% | | Brilinta | $0.665 | +1% | | Lokelma | $0.198 | +59% | | Roxadustat | $0.137 | +57% | Respiratory & Immunology (R&I) R&I business H1 revenue was $3.180 billion, growing 10% (CER), driven by new products like Fasenra, Breztri, Saphnelo, and Tezspire, with Symbicort showing stable performance | R&I Key Medicine (H1 2023) | Total Revenue (billion USD) | YoY Change (CER) | | :--- | :--- | :--- | | Symbicort | $1.288 | +4% | | Fasenra | $0.744 | +14% | | Breztri | $0.307 | +76% | | Saphnelo | $0.115 | >3 times | | Tezspire (Alliance Revenue) | $0.105 | >6 times | Vaccines & Immune Therapies (V&I) H1 2023 V&I revenue significantly declined 76% (CER) to $632 million, mainly due to the conclusion of COVID-19 vaccine contracts and reduced demand for COVID-19 antibodies - Total revenue from COVID-19 monoclonal antibodies (mAbs) was $306 million, a 65% decrease (CER) year-on-year, with all product sales from Evusheld in Q1, and a $180 million license fee from Serum Institute of India (SII) in Q257 - COVID-19 vaccine (Vaxzevria) revenue was $28 million, a 98% decrease (CER) year-on-year due to contract conclusion57 Rare Disease Business H1 2023 Rare Disease revenue grew 12% (CER) to $3.819 billion, driven by C5 inhibitor products and strong patient demand for Strensiq, with Ultomiris showing significant growth | Rare Disease Key Medicine (H1 2023) | Total Revenue (billion USD) | YoY Change (CER) | Key Drivers | | :--- | :--- | :--- | :--- | | Ultomiris | $1.364 | +64% | Expansion in neurological indications and new markets, and continued conversion from Soliris | | Soliris | $1.648 | -16% | Impacted by successful conversion to Ultomiris | | Strensiq | $0.562 | +26% | Strong patient demand and geographical expansion | | Koselugo | $0.159 | +57% | Expansion in new markets | Financial Performance Analysis Profit and Loss Analysis H1 2023 reported operating profit significantly increased to $5.005 billion, with gross margin improving due to reduced low-margin COVID-19 products and a $712 million Beyfortus contract gain | P&L Item (H1 2023) | Amount (billion USD) | YoY Change (CER) | | :--- | :--- | :--- | | Total Revenue | $22.295 | +4% | | Gross Profit | $18.430 | +24% | | Product Sales Gross Margin | 82.0% | +13 percentage points | | R&D Expenses | $5.278 | +16% | | SG&A Expenses | $9.045 | -2% | | Other Operating Income | $1.163 | >5 times | | Operating Profit | $5.005 | >4 times | | Profit Before Tax | $4.350 | >6 times | | Net Profit | $3.624 | >6 times | - Gross margin improvement was driven by an increased proportion of high-margin Oncology and Rare Disease medicines, and a significant decline in low-margin Vaxzevria sales68 - Other operating income includes a $712 million gain from an updated contractual relationship for Beyfortus71 - Reported SG&A expenses were impacted by a $510 million provision related to legal settlements with Bristol Myers Squibb (BMS) and Ono70 Cash Flow and Net Debt H1 2023 net cash from operating activities was $4.851 billion, while net debt increased to $23.970 billion due to intangible asset acquisitions and dividend payments | Cash Flow Statement Item (H1 2023) | Amount (billion USD) | | :--- | :--- | | Net cash generated from operating activities | $4.851 | | Net cash used in investing activities | ($1.766) | | Net cash used in financing activities | ($3.550) | - Increased cash outflow from investing activities was primarily due to intangible asset purchases, including the acquisition of CinCor for $1.436 billion76 | Net Debt Composition | June 30, 2023 (billion USD) | December 31, 2022 (billion USD) | | :--- | :--- | :--- | | Cash and Investments | $5.812 | $6.405 | | Total Debt | ($29.838) | ($29.232) | | Net Derivative Financial Instruments | $0.056 | ($0.096) | | Net Debt | ($23.970) | ($22.923) | Principal Risks and Uncertainties The company's principal risks remain consistent with the 2022 annual report, covering product pipeline, commercialization, supply chain, legal compliance, and macroeconomic factors - Product Pipeline Risk: Failure or delay in new drug development or launch; failure to meet regulatory or ethical requirements92 - Commercialization Risk: Pricing, affordability, market access, and competitive pressures; failure or delay in commercial strategy execution92 - Supply Chain and Execution Risk: Failure to maintain compliant, high-quality medicine supply; IT or cybersecurity failures; failure to attract and retain talent93 - Legal and Compliance Risk: Safety or efficacy of marketed medicines questioned; adverse outcomes from litigation or government investigations; product-related intellectual property risks93 - Economic and Financial Risk: Failure to achieve strategic plans or targets; geopolitical and macroeconomic volatility disrupting global operations93 Sustainability Sustainability Summary The company made significant progress in sustainability, focusing on healthcare access, environmental protection, and ethics, including expanding health programs and investing $400 million in the AZ Forest project - Healthcare Access: The "Healthy Heart Africa" (HHA) program has conducted over 38.5 million blood pressure screenings since its 2014 launch, and the "Young Health Programme" (YHP) has educated over 10 million young people on non-communicable disease risks94 - Environmental Protection: Announced expansion of the AZ Forest program with an increased investment of $400 million, aiming to plant 200 million trees by 2030, and partnered with Vanguard Renewables to decarbonize all US R&D and manufacturing sites by end of 2026 using renewable natural gas95 - Ethics and Transparency: Hosted internal discussions on clinical trial diversity and conducted employee events like "World Day for Cultural Diversity" and "Pride Month" to foster cultural intelligence and inclusivity97 Research and Development Progress R&D Highlights R&D pipeline achieved major breakthroughs, including positive trial results for datopotamab deruxtecan and Tagrisso, and key US approvals for Farxiga and Beyfortus, while some projects were terminated - Datopotamab deruxtecan (Dato-DXd): The TROPION-Lung01 Phase III trial met one of its dual primary endpoints, showing statistically significant improvement in progression-free survival (PFS) compared to docetaxel in previously treated advanced NSCLC patients106 - Tagrisso: The FLAURA2 Phase III trial met its primary endpoint, demonstrating significantly improved PFS for advanced EGFRm NSCLC patients when Tagrisso is combined with chemotherapy compared to monotherapy101 - Farxiga: Approved in the US to reduce the risk of cardiovascular death, hospitalization for heart failure, and urgent heart failure visits in adult heart failure patients, regardless of left ventricular ejection fraction107 - Beyfortus: Approved in the US for the prevention of respiratory syncytial virus (RSV) lower respiratory tract disease in neonates and infants during their first RSV season113 - Project Terminations: Clinical development of brazikumab in inflammatory bowel disease (IBD) was terminated, as was the Phase III trial of Fasenra in bullous pemphigoid due to futility110111 Interim Financial Statements Financial Statements This section presents the unaudited condensed consolidated interim financial statements for H1 2023, prepared in accordance with IAS 34 | Statement Name | Corresponding Table | Page Number | | :--- | :--- | :--- | | Condensed Consolidated Statement of Comprehensive Income (H1 2023) | Table 20 | 42 | | Condensed Consolidated Statement of Comprehensive Income (Q2 2023) | Table 21 | 43 | | Condensed Consolidated Statement of Financial Position | Table 22 | 44 | | Condensed Consolidated Statement of Changes in Equity | Table 23 | 45 | | Condensed Consolidated Statement of Cash Flows | Table 24 | 46 | Notes to the Interim Financial Statements Note 1: Basis of preparation and accounting policies Financial statements are prepared under IAS 34, with updated revenue presentation from January 1, 2023, now separately reporting Alliance Revenue to reflect recurring profit-sharing - Effective January 1, 2023, total revenue is disaggregated into Product Sales, Alliance Revenue, and Collaboration Revenue, with Alliance Revenue primarily comprising profit shares, revenue shares, or royalties related to sales with partners137 - The Board continues to prepare financial statements on a going concern basis, as the company has sufficient financial resources, including $5.7 billion in cash and $6.9 billion in undrawn committed bank facilities139140 Note 6: Legal proceedings and contingent liabilities The company updated on significant legal proceedings, including a global settlement with BMS and Ono for Imfinzi/Imjudo patents, with a $510 million provision, and ongoing product liability lawsuits for Onglyza and Nexium - Imfinzi and Imjudo Patent Litigation: The company reached a global settlement agreement with BMS and Ono in July 2023, resolving all related patent disputes, and a $510 million provision was recognized162 - Onglyza Product Liability Litigation: In the US, lawsuits regarding Onglyza and Kombiglyze causing heart failure are ongoing, with a federal court's summary judgment in AstraZeneca's favor currently under appeal by plaintiffs165178 - Nexium and Prilosec Product Liability Litigation: In the US, the company continues to face numerous lawsuits alleging proton pump inhibitors (PPIs) cause kidney injury and gastric cancer, with the first bellwether trial scheduled for October 2023176 Note 7: Subsequent events Post-period, Alexion agreed to acquire and license Pfizer's early-stage rare disease gene therapy portfolio for up to $1 billion plus tiered sales royalties - In July 2023, Alexion reached an agreement with Pfizer to acquire its early-stage rare disease gene therapy portfolio for up to $1 billion plus tiered sales royalties, with the transaction expected to close in Q3 2023187