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What Factors Impacted AstraZeneca’s Growth?

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AstraZeneca’s 2015 revenue

AstraZeneca (AZN) reported a decline of ~7% to $24.7 billion in its 2015 results. The company reported an operational growth of 1% during 2015, which was more than offset by the negative impact of foreign exchange. Furthermore, the company estimates a low to mid-single-digit decline in revenues for 2016, according to its financial guidance.

The above graph shows the revenues of AstraZeneca in each quarter. As the company has operations in over 100 countries, and ~60% of total revenues are from sales outside US markets, the company is largely exposed to currency risk. The impact of foreign exchange on the company’s revenues has led to a negative growth in absolute figures.

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The growth platforms

AstraZeneca reported that, in 2015, positive contribution shifted from key drugs Nexium and Synagis to new products in growth platforms, including Brilinta and new oncology products. The revenues from growth platforms increased by 11% at constant exchange rates, contributing nearly 57% of total 2015 revenues for AstraZeneca. The details about the growth platforms will be discussed later in this series.

Segment-wise performance

AstraZeneca’s business is divided into four segments.

  • The cardiovascular and metabolic diseases segment is the largest revenue contributor, with contributions of around 40% of total revenues for AstraZeneca. At constant exchange rates, the segment revenues increased by 4% in 2015 due to the strong performance of Brilinta, Onglyza, Bydureon, and Farxiga, partially offset by a 3% decline in revenues of its legacy drug Crestor.
  • The infection, neuroscience, and gastrointestinal segment is the second-largest revenue contributor for AstraZeneca, contributing ~27% of the total revenues for 2015. At constant exchange rates, the segment revenues declined by ~16% during 2015 following the weak performance of its drugs Nexium, Seroquel, and Synagis.
  • The respiratory, inflammation, and autoimmunity segment is another important segment for AstraZeneca’s growth platform. At constant exchange rates, the segment revenues increased by 7% in 2015, with a strong performance by Pulmicort, which was partially offset by lower Symbicort sales. The segment also includes a few new products, including Duaklir and Tudorza.
  • The oncology segment is now included in the growth platform. New products Tagrisso and Lynparza are expected to drive the growth of this segment in the coming years. At constant exchange rates, the segment revenues increased by 7% during 2015, following a strong performance of Zoladex and Faslodex, partially offset by Iressa. Iressa is exposed to competition from other EGFR (epidermal growth factor receptor) inhibitors such as Tykerb from Novartis (NVS), Erbitux from Eli Lilly and Company (LLY), and Vectibix from Amgen (AMGN).

The company also reported ~$1.1 billion in externalization revenues during 2015. Externalization revenues include $450 million from a hematology collaboration with Celgene (CELG), $200 million from its Movantik agreement with Daiichi Sankyo, and other collaborations. To divest any risk, investors could consider ETFs such as the VanEck Vectors Pharmaceutical ETF (PPH), which holds ~4.5% of its total assets in AstraZeneca, or the First Trust Value Line Dividend ETF (FVD), which holds ~0.5% of its total assets in AstraZeneca.

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