The day before, AstraZeneca had shared in the pharma stock boon with listed companies on the Euro Stoxx 600, FTSE 100 and US indices, following a largely unanticipated Donald Trump victory. As European markets digested this news early on Wednesday, AstraZeneca’s shares spiked 3% to 4600p per share, recording their biggest gain all week.
However, the pharma titan’s $1bn operating profit loss over the third quarter proved sobering for markets, as did its 4% fall in revenue to $5.7bn. Year to date, the company’s total revenue has dropped 3% to $17.4bn.
AstraZeneca blamed poor sales performance for the weaker Q3 revenue, driven by increased competition from generic alternatives to its cholesterol fighting drug Crestor and acid reflux medication Nexium. Total product sales were down by 14% at $5bn, as Crestor and Nexium sales declined by 82% and 50% in the US, respectively.
Despite this, earnings per share rose 4% to $0.80, thanks to a $453m tax benefit from Canadian, British and Swedish transfer pricing arrangements.
EdenTree UK Equity Growth manager Ketan Patel said he remained encouraged by both the diabetes and oncology product sales from AstraZeneca’s growth platform, which spans a number of emerging markets, and its pipeline of innovative drugs.
“The news flow in the pipeline, especially immuno-oncology, will be a key driver of share price in the near to medium term,” he said. “The shares have underperformed significantly both GlaxoSmithKline and the FTSE 100 year to date. In a low yield environment, the 4.5% dividend will provide some comfort to long-term shareholders who may be questioning why management rebuffed the £70bn bid by Pfizer earlier in the year.”
While Patel admits the pharmaceutical sector “has been blessed with two recent seismic events,” Brexit and Donald Trump’s victory, he emphasises that there is still a degree of long-term uncertainty.
“The longer-term overhang for the sector is whether the Republicans who control both Houses of Congress will go along with Trump’s campaign promise of repealing the Affordable Healthcare Act, better known as “Obamacare,” Patel stated. “This would lead to greater uncertainty for pharmaceutical companies and a shift towards greater power/discretion for insurers. The resulting increase in out-of-pocket spend for patients will lead to further scrutiny over drug prices in a country which already spends over 17% of its GDP on healthcare.
“For long-term investors, the sector remains highly appealing trading on a double-digit discount to the overall market and offering yields in the range of 4-5% in the UK and 3-4% in Europe and the US.”
The British television network ITV also released third quarter figures Thursday but its results were slightly less downbeat.
The group's rebalancing strategy paid off in a 5% boost to total external revenue, which stood at £2.2bn, including currency benefit. But chief executive Adam Crozier said the climate of ‘political and economic uncertainty’ had made advertisers more cautious, leading to 4% lower ad revenue for the group.
Online viewership in the network’s programming via its streaming hub surged by 49%, allowing the group to comfortably predict it would meet its end of year double-digit revenue growth target.
The ITV Family division, by comparison, struggled. Revenue was down 4% in Q3 and 11% in October against the Rugby World Cup in 2015. As a result, Crozier announced Q4 revenue was likely to be 7% lower and would be down 3% for the full year.
Nevertheless, investors in ITV chose to accentuate the positive, pushing its share price up 2.4% to 169.9p.