AstraZeneca PLC Q4 FY2024 earnings call

Management Statement and Operational Highlights

• 2024 was a very strong year with total revenue up 21% and core EPS up 19%. Had 14% growth in core OpEx relative to revenue growth. Delivered 9 high-value pivotal trial readouts in 2024 with over $5B in non-risk adjusted peak year revenue potential. Anticipated 20 new medicines by 2030 with 8 approved to date. China revenues had 2024 growth of 11%, with Q4 decline driven by hospital ordering dynamics and mild winter respiratory demand. Emerging markets had 2024 growth of 22% with substantial unmet need and increasing healthcare investment. 2025 is catalyst-rich with high-value trial readouts expected, over 90 late-stage trials underway with average non-risk adjusted peak year revenue per trial of $1 billion, and anticipated $15B+ in non-risk adjusted peak year revenue potential from 2025 readouts. Financials: 2024 total revenue grew 21% exceeding guidance, product sales grew 19%, alliance revenue +55%, collaboration revenue +54%. Core product sales gross margin 81.2% in 2024. Core operating expense up 14% below top-line growth. Core R&D up 19%, SG&A up 11% with SG&A at 28% of total revenue. Net cash flow from operating activities increased $1.5B, CapEx $2.2B. Anticipate deal payments ~$3B in 2025, net debt $24.6B, net debt-to-EBITDA 1.5x. Increased 2024 dividend to $3.10/share and 2025 dividend to $3.20/share. 2025 guidance: total revenue high single-digit % increase, core EPS low double-digit % increase, SG&A growth slower than revenue, R&D in low 20s% of total revenue, and significant manufacturing investments in various locations.

Segment Performance

• Oncology: 2024 total revenues were $22.4 billion, an impressive 24% increase. Key medicines: Tagrisso exceeded $6.5 billion; Lynparza over $3 billion; Imfinzi and Imjudo combined approached $5 billion; Calquence and Enhertu each achieved over $2 billion in full-year revenues. In Q4, Tagrisso global revenues grew 21%, Calquence total revenues increased 20%, Imfinzi and Imjudo delivered 18% and 28% growth respectively, Lynparza achieved global sales over $3 billion, Enhertu had 54% growth in Q4, and Truqap had $163 million in Q4 revenues.
• BioPharmaceuticals: 2024 total revenue grew 21% to $21.9 billion. In Q4, growth was 24%. R&I grew 28% despite softer demand in China due to mild winter respiratory virus season. CVRM grew 17% with Farxiga up 22%, partly offset by year-end hospital budget dynamics in China. Breztri delivered over $0.25 billion in revenue in Q4. Wainua launch in ATTR polyneuropathy progressing well, Airsupra showing volume growth.
• Rare disease: 2024 total revenue was $8.8 billion, up 16% year-over-year. Ultomiris grew 33% driven by neurology indications. Strensiq and Koselugo grew 37% and 97% respectively, driven by continued patient demand, new launches, and favorable timings in emerging markets.

Guidance

• AstraZeneca expects total revenue to increase by a high single-digit percentage and core EPS to increase by a low double-digit percentage in 2025. Anticipates SG&A costs to grow at a slower pace than revenue. R&D expenses are expected to remain in the low 20s percentage range of total revenue. The company has significant manufacturing expansion projects planned, including a new end-to-end ADC manufacturing site in Singapore, cell therapy manufacturing site in Rockville, MD, API facility in Dublin, Ireland, and site in Qingdao, China for inhaled therapies. Also, upgrading data and ERP systems to support growth and leverage AI.

Risks

• Investigation in China regarding suspected unpaid importation taxes totaling $900,000 related to Imfinzi and Imjudo, with potential fines of 1 to 5 times the avoided import duties if AstraZeneca is found liable. Headwinds from VBP inclusion for several medicines in China, Part D redesign in the U.S., Brilinta patent expiry, and price cuts/rebates in Europe. Impact from biosimilars entering the market, such as Soliris biosimilars in the U.S. in March 2025.

Question and Answer

Q: James Gordon from JPMorgan asked about China revenue decline in Q4, evolution during the quarter, current state in 2025, and implications of the investigation on provisions.

A: Pascal Soriot mentioned the investigation involves suspected unpaid importation taxes on Imfinzi and Imjudo, with potential fines 1-5x avoided duties. China Q4 revenue decline was due to hospital ordering dynamics and mild winter respiratory demand. Iskra Reic noted respiratory products affected by mild winter, and Aradhana Sarin said China is included in guidance with underlying brand growth but VBP headwinds.

Q: Luisa Hector from Berenberg asked about China market share for key drugs and Part D impact on 2025.

A: Iskra Reic confirmed no notable changes in market share for key drugs in China so far. Dave Fredrickson said Part D impact is manageable with growth opportunities in oncology medicines like Tagrisso, Enhertu, Imfinzi, and Truqap.

Q: Sachin Jain from Bank of America asked about baxdrostat's peak revenue split and camizestrant's confidence.

A: Ruud Dobber said baxdrostat's peak revenue split not disclosed but substantial on both mono and combo sides. Susan Galbraith discussed camizestrant's confidence based on SERENA-2 trial data showing benefit over fulvestrant and ability to combine with CDK4/6 inhibitors.

Q: Mattias Sigmund from Handelsbanken asked about oral GLP1 and oral PCSK9 trials.

A: Sharon Barr said oral GLP1 trials enrolling well, and oral PCSK9 Phase 2b data to be released next month with favorable profile compared to other PCSK9s.

Q: Simon Baker from Redburn Atlantic asked about rilvegostomig's scope and emerging markets growth.

A: Susan Galbraith discussed rilvegostomig's potential in TROPION-Lung10 and other trials. Iskra Reic said emerging markets outside China had 2024 growth of 32% with strong double-digit growth across regions.