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AstraZeneca’s Segment-Wise Performance in Fiscal 2016

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Feb. 27 2017, Updated 4:05 p.m. ET

AstraZeneca’s segments

AstraZeneca (AZN) has classified its product sales into four segments. At constant exchange rates, AstraZeneca reported an 8% decline in its product sales to ~$21.3 billion during fiscal 2016, as well as a 15% decline in its 4Q16 product sales to ~$5.3 billion.

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Cardiovascular and Metabolic Diseases segment

The Cardiovascular and Metabolic Diseases segment is AstraZeneca’s highest revenue-contributing segment, with an ~38% contribution of total product sales. At constant exchange rates, the segment’s revenues fell 13% to ~$8.1 billion in 2016 due to the decrease in its Crestor sales following patent expiry.

For 4Q16, the segment’s revenues fell 26% to ~$1.8 billion. Among its other products, Onlgyza, Atacand, Bydureon, and Byetta had weak performances.

Respiratory segment

The Respiratory segment is another important part of AstraZeneca’s growth platform. At constant exchange rates, the segment’s revenues fell 3% to ~$4.8 billion during 2016, with lower sales of Symbicort and Tudorza/Eklira.

This decrease was partially offset by increased revenues of drugs including Pulmicort, Duaklir, and Daliresp. For 4Q16, the segment’s revenues fell 5% at constant exchange rates to $1.2 billion.

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Oncology segment

The Oncology segment is now included in the growth platform. Among its new products, Tagrisso and Lynparza are expected to drive this segment’s growth in coming years. At constant exchange rates, the segment’s revenues rose 16% to ~$3.4 billion during 2016, following a strong performance of Tagrisso, Lynparza, Zoladex, and Faslodex. The segment’s revenues were partially offset by lower sales of Iressa and legacy products such as Casodex and Arimidex.

For 4Q16, the segment revenues’s rose 26% at constant exchange rates to $930 million. Iressa is exposed to competition from other EGFR inhibitors such as Tykerb from Novartis (NVS), Erbitux from Eli Lilly & Co. (LLY), and Vectibix from Amgen (AMGN).

Other segment

The Other segment includes drugs from the Infection, Neuroscience, and Gastrointestinal franchises. This is AstraZeneca’s second-largest revenue contributor, comprising ~24% of the company’s total product sales for 2016.

At constant exchange rates, the Other segment’s revenues fell ~19% during fiscal 2016, and they fell ~25% during 4Q16. These decreased revenues followed the weak performance of drugs such as Nexium, Seroquel, Synagis, and FluMist.

To diffuse any company-specific risk, investors can consider the Vanguard FTSE Developed Markets ETF (VEA), which holds 0.6% of its total assets in AstraZeneca (AZN).

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