AstraZeneca PLC CEO Pascal Soriot predicted that sales in China will grow by at least 20% this year, boosted by the introduction of five fully reimbursed new drugs in the country, as he announced a joint venture with Alibaba on digital health.
"We are very excited about China," Soriot told reporters at a press conference following AstraZeneca's fourth-quarter and full-year results, having just returned from a visit to China accompanying U.K. Prime Minister Theresa May. "We should be able to grow in the low 20's, maybe we can do more. In the beginning of the year we're doing very well," he said, pointing out that the market in China is growing by 6% to 8%, and the country is now AstraZeneca's second largest market in the world.
Soriot was speaking after the Cambridge, U.K.-based group reported results for 2017, in which total revenue declined by 2%, as expected, due to generic competition to its Crestor cholesterol drug and the antipsychotic Seroquel. Still, the fourth quarter saw a return to growth as revenue from the externalization agreement with Merck & Co. Inc. provided some insulation from the generic erosion and as the launch of a number of new products, notably in oncology, gathered pace.
"AstraZeneca's revenues improved over the course of the year, a sign of how our company is steadily turning a corner," the CEO said. "Strong commercial execution helped us to bring our science to more patients."
New oncology sales came in at $1.31 billion in 2017 thanks to a strong launch of cancer pill Tagrisso and Lynparza, as well as Imfinzi and Calquence. Tagrisso is expected to top $1 billion of annual sales in 2018, making it AstraZeneca's next blockbuster, based on expanded sales in first-line lung cancer.
Brian White, analyst at Cantor Fitzgerald with a "buy" recommendation on AstraZeneca, said oncology is the "star performer" of all the group's growth platforms. "New products are a feature of the growth platforms particularly in oncology and should help alleviate some of the pricing pressure afflicting respiratory and diabetes in particular," White wrote in a note to clients.
The joint venture announced with Chinese tech titans Alibaba and Tencent is intended to capture data and artificial intelligence initially to help with diabetes patients, as well as those with asthma and to track how heart attacks are addressed. "The future is about combining technology with pharmaceuticals," said Soriot.
Elsewhere, AstraZeneca said it remains committed to its dividend policy, and forecast a low single-digit percentage increase in product sales for 2018. Having benefited from the positive impact of recent U.S. tax reforms, by gaining $617 million in 2017, the drugs group said it is not expecting a material impact from the reforms in 2018 or 2019.
"Guidance for 2018 positive — EPS $3.30 to $3.50 — but not as high as the market was looking for which is why the shares are off this morning," said Panmure Gordon's David Cox in a note. "Harsh," he added. "Recent approvals and the strong late stage R&D pipeline indicate AZ has turned a corner." Externalization revenues have been a controversial feature but have allowed the company to invest in the pipeline at a time when the top line has been pressured from generics."
Aside from oncology, heart medicines Brilinta and Farxiga attained blockbuster status in 2017 and AstraZeneca launched its first biologic for asthma, Fasenra.
"We have a tremendous pipeline, a pipeline even stronger than we would have imagined a couple of years ago," said Soriot.
