AstraZeneca sees profit accelerating after turnaround effort

AstraZeneca Plc, one of the drugmakers on the front lines of Covid-19 vaccine efforts, said earnings growth will accelerate this year as its turnaround efforts pay off.

Profit excluding some items will be $4.75 a share to $5 a share, the drugmaker said in a statement Thursday. The range was below the $5.22 analysts had anticipated, but the guidance excludes the impact of the coronavirus vaccine and the takeover of rare-disease specialist Alexion Pharmaceuticals Inc.

Astra has rebuilt a pipeline of key blockbuster drugs, especially in cancer, and stands to benefit even as the Covid-19 outbreak dents drugmakers’ growth prospects by discouraging doctors’ visits. The pandemic also prompted it to join forces with the University of Oxford to develop a vaccine that’s faced criticism while emerging as a crucial tool to help curb infections.

Chief Executive Officer Pascal Soriot defended Astra’s achievements. “Is it perfect? No it’s not perfect, but it’s great,” he said on a call with journalists. “What we have today is a vaccine that provides 100% protection against severe disease, a vaccine that is well tolerated.”

Astra shares rose as much as 3% in London trading. The vaccine could provide a recurring revenue stream as the prospect of annual booster shots increases with the growing number of coronavirus mutations. The shot has been cleared by regulators in more than 50 countries.

The remaining questions facing the vaccine are about its efficacy in the elderly and its ability to thwart new variants such as the one that first emerged in South Africa. A U.S. study on roughly 30,000 volunteers is expected to readout in coming weeks, according to Mene Pangalos, who oversees pharmaceutical research.

Pangalos told reporters Astra was hoping to have the next generation of vaccines to tackle variants in the clinic for testing this spring, with plans to make the products available by autumn for protection next winter. The company said it’s trying to reduce the time needed to reach production at scale for the variant vaccines to between six and nine months by using existing data and optimizing the supply chain.

The vaccine has already delivered $2 million in sales, but revenues will be reported separately from next quarter because they aren’t part of Astra’s core business, Chief Financial Officer Marc Dunoyer said in an interview. The company expects the revenue to be “substantial” this year, he said.

The approach may change if the shot becomes profitable, according to Dunoyer. “If one day we get into profit making, it will come into the sort of normal business of AstraZeneca,” he said.

Astra has committed to providing the vaccine at cost during the period of the pandemic -- and for far longer in the case of low- and middle-income countries.

The vaccine’s success has fueled speculation over whether Astra could make a bigger push into the vaccines business. Dunoyer said that while it was possible, it was too early to look at now.

At the moment, the company is focused on the takeover of Alexion, which is due to close in the third quarter. One deal motivator was profitability, the company said when announcing the transaction. Guidance for the year may be revised once the deal has completed, Astra said.

Astra approached Alexion last summer after watching the company closely for about two years, according to Dunoyer. The companies have started initiating a transition program, but are limited in what they can do before shareholders approve the deal. Dunoyer isn’t concerned about shareholder sentiment, gauging the response as positive or neutral.

Astra may also have another unexpected weapon in the pandemic. One of its older drugs on Wednesday showed potential against the new virus in a small study. Early treatment with the inhaled asthma medicine Pulmicort cut the need for urgent care and hospitalization in the test, which may give it a welcome boost since it was one of the portfolio’s few laggards last year.