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AstraZeneca’s Strong Q3 Performance and Strategic Deal for Obesity Drug Drive Positive Outlook

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AstraZeneca production plant
Photo by Roland Magnusson/iStock Editorial via Getty Images

AstraZeneca (NASDAQ:AZN) reported a robust Q3 performance, with revenues reaching $11.5B, reflecting a 5% year-over-year increase. Although slightly below consensus estimates, the decline in COVID-19 medicines was counterbalanced by a 12% rise in revenue from non-COVID drugs.

The company experienced remarkable growth in its oncology, cardiovascular, renal and metabolic (CVRM), and rare disease therapeutics. Key products such as Imfinzi and Tagrisso in the oncology portfolio achieved significant sales increases of 53% and 5% to $1.1B and $1.46B, respectively. Moreover, diabetes drug Farxiga surged by 41% to $1.5B, while hyperkalemia medicine Lokelma saw a 30% revenue rise to $102M.

Of particular note, AstraZeneca (AZN) executed a substantial licensing agreement aimed at accelerating its obesity pipeline, introducing competition to Novo Nordiskโ€™s (NVO) Wegovy and Eli Lillyโ€™s (LLY) Zepbound, both leading products in the fast-growing obesity category.

Under this agreement, AstraZeneca (AZN) secured an exclusive licensing deal for China-based Eccogeneโ€™s ECC5004 drug candidate, designed to address obesity, type-2 diabetes, and other cardiometabolic conditions. The promising preliminary results from ECC5004โ€™s phase 1 trial underpin the strategic significance of this partnership.

As part of the deal, AstraZeneca (AZN) will make an initial payment of $185M to Eccogene, with the potential for up to $1.825B in future milestone-linked payments and tiered royalties on sales.

Gross margins for Q3 marginally improved to 81%, attributed to a favorable product mix of oncology and rare disease drugs and reduced reliance on low-margin COVID medicines. However, an increasing mix of products with profit-sharing arrangements exerted pressure on margins.

Bolstered by the robust performance of non-COVID drug sales, AstraZeneca (AZN) revised its guidance for 2023, now anticipating a mid single-digit increase in total revenues as compared to the previously expected low-to-mid single-digit rise. Excluding COVID medicines, the company foresees revenues growing by the low-teens, up from the prior forecast of low double-digit increase. Additionally, core EPS is projected to achieve a low double-digit to low-teens increase, a positive revision from the previous high single-digit to low double-digit expectation.

Reflecting investor confidence in the companyโ€™s trajectory, shares of the U.K.-based biotech firm surged by 2.28% in premarket trading on Thursday.

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