As sales soar in China, AZ warns of hit from COVID-19 epidemic
Just as China jumped to become AstraZeneca’s second-largest region by revenue, the U.K. pharma warned in its 2020 guidance that the COVID-19 outbreak may have a negative impact on revenues for at least the next few months.
AstraZeneca plc (LSE:AZN; NYSE:AZN) reported 2019 earnings that showed U.S. product sales of $7.7 billion, up 13% in constant exchange rates from the prior year and accounting for 33% of the company’s $23.6 billion in sales. China accounted for 21% of product sales, at nearly $4.9 billion, and continued to be the company’s fastest growing region, up 35% from the prior year.
AZ has by far the largest exposure to China of all the multinational pharmas: no other company has disclosed China sales figures that account for more than 7.5% of total sales (see Figure: “Pharma China Sales”).
AZ said it expects total revenue in 2020 to increase by high single-digit to low double-digit percentage, with core EPS increasing by mid- to high-teens percentage. The guidance “assumes an unfavorable impact from China lasting up to a few months as a result of the recent novel coronavirus (COVID-19) outbreak,” the company said. AZ leadership declined to break out the degree of negative impact taken into account in the guidance on the company’s earnings conference call.
Leon Wang, EVP of international, said on the call that the challenge was largely on the commercial side. “Right now the impact is mainly on our sales people who cannot easily visit the hospital and access the healthcare professionals because the doctors, especially some in specialty, are focusing on fighting the epidemic,” he said (see "Coronavirus Disrupts MNC Operations in China").
He added that the disruptions are likely to be temporary. AZ said it would update investors on COVID-19’s impact on its annual guidance during its 1Q20 earnings.
Wang also commented on the situation on the ground in China. “I think the situation outside Hubei and Wuhan is improving. I think we cannot speculate how long this epidemic would last.”
Elsewhere in its earnings, AZ reported strong sales in cancer, with Tagrisso osimertinib growing 74% at constant exchange rates to $3.2 billion. On the conference call, David Fredrickson, EVP of oncology, said AZ expects Tagrisso to gain inclusion in China’s National Reimbursement Drug List for first-line NSCLC this year. Tagrisso is already on the NRDL for the second-line setting.
Anti-PD-L1 drug Imfinzi durvalumab and PARP inhibitor Lynparza olaparib crossed the $1 billion threshold in 2019, with sales of $1.5 billion and $1.2 billion, respectively.
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Figure: Pharma China sales
AstraZeneca plc (LSE:AZN; NYSE:AZN) has by far the most sales in China among multinational pharmas, at about $4.9 billion last year, and the largest exposure to China, with 21% of product sales coming from the country. As a point of reference, BeiGene Ltd. (NASDAQ:BGNE; HKEX:6160), which has the largest commercial operations of any Chinese biotech, posted nine-month 2019 sales of $165.7 million, all of which came from the country. With Brukinsa zanubrutinib now approved in the U.S., BeiGene won’t be wholly reliant on China going forward. The table includes MNCs that disclose China revenues, and revenue figures exclude non-drug sales.
PARP - Poly(ADP-ribose) polymerase
PD-L1 (B7-H1; CD274) - Programmed cell death 1 ligand