Earnings

AstraZeneca braces for coronavirus hit, but no impact so far

Simon Dawson | Bloomberg | Getty Images

AstraZeneca forecast a likely slowdown in revenue growth this year, assuming a hit from China’s coronavirus epidemic lasting up to a few months, although it added there had been limited disruption to its operations so far.

Shares in the company, one of the world’s major drugmakers, tumbled as much as 6% in early Friday trade after fourth-quarter results also missed analysts’ expectations.

However, they recovered after CEO Pascal Soriot played down the impact of the coronavirus outbreak on the business so far. He told Reuters revenues could reach the top end of its guidance range if the epidemic was brought quickly under control.

The company, moving into a third year of growth, predicted revenues would rise by a high single-digit to a low double-digit percentage at constant exchange rates this year, compared with 13% in 2019.

Analysts are currently forecasting growth of 10%, according to Refinitiv data, although Jefferies analysts said anything below a double-digit estimate could be a disappointment.

“We want to be actively conservative in our outlook,” Soriot said on a call with journalists, describing the situation around the virus that has killed more than 1,350 people in China and infected tens of thousands more, as “full of uncertainty.”

“So far, we have limited disruption,” he added.

At 1312 GMT, AstraZeneca shares were down 2.3% at 7,448 pence.

China was once again a key driver for the firm in the final quarter of 2019, with sales there surging 28% to $1.19 billion, making up 19% of total product sales in the period.

“Now in a much better place, AstraZeneca should be able to weather any coronavirus-related storm,” AJ Bell investment director Russ Mould said.

Last week, British rival GSK said it had not faced much disruption to its supply chain from the virus outbreak, but was monitoring the situation.

In the fourth quarter, AstraZeneca’s product sales of $6.25 billion and core earnings of 89 cents per share missed analysts’ expectations, according to a company-provided consensus.

Sales of its top-selling cancer drug Tagrisso fell short of forecasts due to adjustments for U.S. rebates and discounts, Bryan Garnier analyst Eric Le Berrigaud said.

“New drugs which were growth drivers all through 2019 posted below-expectations fourth-quarter sales,” Berrigaud said.

AstraZeneca forecast core earnings per share would rise by a mid- to high-teens percentage in 2020, compared with just 1% in 2019 and analysts’ current consensus forecast of about 20%.

Soriot also said the company was on track to reach an operating profit margin target of more than 30% in 2021.

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