Revenues in 2016

In its 3Q16 earnings release, AstraZeneca (AZN) projected that its 2016 revenues and EPS (earnings per share) will fall 0.0%–5.0% YoY (year-over-year). The company also explained the following capital-allocation priorities for 2016:

  • making business investments
  • returning value to shareholders through a progressive dividend policy
  • maintaining an investment-grade credit rating
  • exploring opportunities that will be earnings-accretive in the future

If AstraZeneca manages to successfully implement its capital allocation strategy, it could have a positive impact on the share prices of the company as well as the VanEck Vectors Pharmaceutical ETF (PPH). AstraZeneca makes up about 4.6% of PPH’s total portfolio holdings.

AstraZeneca Could See Modest Fall in 2016 Revenues

Revenue projections

Wall Street analysts have projected that AstraZeneca’s 2016 revenues will fall about 3.8% YoY and reach approximately $22.7 billion. Peers such as Bristol-Myers Squibb (BMY), Pfizer (PFE), and Novartis (NVS) are expected to earn 2016 revenues of $19.3 billion, $52.9 billion, and $48.8 billion, respectively.

The fall in AstraZeneca’s 2016 revenues is mainly due to its loss of patent exclusivity in the United States for leading drugs such as Crestor, Nexium, and Seroquel. The company has also seen unfavorable gross to net adjustments for its Symbicort inhaler in the United States.

On June 22, 2016, the Advisory Committee for the Centers for Disease Control and Prevention declared that the live attenuated influenza vaccine marketed as FluMist should not be used as a vaccination in the 2016–2017 influenza season. The decision was based on data obtained from the 2015–2016 influenza season that showed that the use of FluMist resulted in no protective benefit in patients in the age group of two to 17 years. The finding affected AstraZeneca’s FluMist revenues in 2016.

AstraZeneca has also witnessed certain unfavorable one-time events in emerging markets, which has further put downward pressure on its 2016 revenues.

In the next part of this series, we’ll explore AstraZeneca’s strategy to return to growth.

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