AstraZeneca (AZN) Updates on Growth Targets; Sees Annual Revs of $45B+ by FY23

The Board of AstraZeneca plc (NYSE: AZN) is today publishing a presentation updating on the continued progress in executing its strategy, which centres on achieving scientific leadership, strengthening its growth platforms and returning to growth. The presentation will demonstrate AstraZeneca’s excellent growth prospects, rapidly progressing pipeline and the future delivery of shareholder value as an independent company. The presentation and the contents of this announcement are based on the key sources, bases and assumptions set out at the end of this announcement.

In addition, the Company is providing new, long-term, financial targets which highlight the significant potential for shareholder value creation. From 2017 to 2023 AstraZeneca is targeting strong and consistent revenue growth leading to annual revenues of greater than $45 billion by 2023. Operating leverage is expected to result in core earnings growth in excess of revenue growth during this period.

Transformation of AstraZeneca is well underway

AstraZeneca has achieved momentum in the delivery of its clearly defined strategic objectives:

Under the new management team, AstraZeneca is executing its strategy successfully and is re-positioned for a return to growth;
Significant transformation of the pipeline has already been delivered since 2012;
Scientific discoveries have been accelerated to extend the late stage pipeline, including access to multiple technologies which place AstraZeneca at the heart of immuno-oncology development; and
Five key growth platforms are sustaining near-term growth and AstraZeneca remains confident that 2017 revenues should be broadly in line with 2013.

AstraZeneca has a growing and accelerating late stage pipeline

The progressive changes AstraZeneca has made have fuelled the transformation of the pipeline. The presentation demonstrates:

A comprehensive portfolio strongly positioned to exploit synergistic combinations of small molecules and biologics in oncology;
Key mid-stage pipeline assets showing significant promise, including MEDI4736, AZD9291, olaparib, PT003 & PT010 (LABA/LAMA and triple LABA/LAMA/ICS), benralizumab, and the fixed dose combination saxagliptin/dapagliflozin;
Accelerated timelines set out for key Phase II and Phase III assets;
Near term value driven by multiple data readouts, regulatory milestones and 19 NME candidates for registration trial starts in 2014/15;
Attractive optionality with additional assets showing significant promise: AZD3293/(BACE), brodalumab, roxadustat, anifrolumab/sifalimumab, tralokinumab, mavrilimumab and a broad immuno-oncology portfolio; and
Aggregate risk-adjusted pipeline peak year sales potential of around $23 billion and non risk-adjusted pipeline peak year sales potential of around $63 billion.

New long-term revenue targets for AstraZeneca's five key growth platforms

AstraZeneca has sharpened its focus on five key growth platforms and the presentation sets out its long-term revenue targets:

Brilinta ~$3.5 billion in 2023, driven by investment in on-going clinical studies to access broader opportunities;
Diabetes ~$8 billion in 2023, reinforced by the strong launch of Farxiga/Forxiga in the US and Germany, the fixed dose combination saxagliptin/dapagliflozin, and the rapid integration of the BMS alliance;
Respiratory ~$8 billion in 2023, driven by a strong current product franchise and a diverse emerging pipeline covering a broad set of patients;
Emerging Markets - mid-to-high single-digit growth, building on the growth in China and introduction of innovative products. Q1 growth in China of 22% (at CER); and
Japan - low single-digit growth, sustained by key products including Nexium, Crestor and Symbicort which enjoy medium-term market exclusivity

New financial targets

In March 2013 AstraZeneca announced its new strategy. As part of its annual planning process later in 2013 it revised its ten year business plan to reflect this new strategy. This is the basis of the new information published today which sets out the financial targets underpinning the Board's confidence in AstraZeneca's independent strategy:

The Company continues to invest in the key growth platforms, maximising the impact of new product launches and benefits of 2013 business development activity. As previously stated, the Company expects 2017 revenues will be broadly in line with those of 2013;
From 2017 to 2023 AstraZeneca is targeting strong and consistent revenue growth leading to annual revenues of greater than $45 billion by 2023, and operating leverage is expected to result in core earnings growth in excess of revenue growth during this period.

Pascal Soriot, Chief Executive of AstraZeneca, said: "AstraZeneca is completing its transformation, and now has the right size, focus and team to deliver on one of the most exciting pipelines in the pharmaceutical industry. We have fostered a culture of innovation where science is at the heart of what we do and today we set out the greatly improved quality of our mid and late stage pipeline and its significant commercial potential. We are continuing to create significant value for shareholders from our independent strategy.”

Leif Johansson, Chairman of AstraZeneca, said: "The increasingly visible success of our independent strategy highlights the future prospects for our shareholders. These are benefits that should fully accrue to AstraZeneca's shareholders."

Additional information

Today’s presentation also includes the following information in relation to non risk-adjusted peak year sales estimates for key pipeline assets:

Non-risk adjusted peak year sales potential for AstraZeneca’s key pipeline assets:

MEDI4736 (inc. combination therapies) ~$6.5 billion (compared to analyst estimates of $2 billion - $7 billion);
AZD9291 (monotherapy) ~$3 billion (compared to analyst estimates of $1 billion - $2 billion);
Olaparib ~$2 billion (compared to analyst estimates of $1.5 billion - $3 billion);
PT003 / PT010 ~$4 billion (compared to analyst estimates of $3.5 billion - $4 billion);
Benralizumab ~$2 billion (compared to analyst estimates of $1 billion - $2 billion); and
Saxagliptin/dapagliflozin fixed dose combination ~$3 billion.

Non-risk adjusted peak year sales potential for AstraZeneca’s four further pipeline assets:

Brodalumab ~ analyst estimates of $0.5 billion - $1.5 billion;
Anifrolumab/sifalimumab ~$1 billion (compared to analyst estimates of $0.2 billion - $1 billion);
Roxadustat/FG-4592 ~ analyst estimates of $1 billion - $2.5 billion; and
AZD3293 (BACE) ~$5 billion (compared to analyst estimates of $0.5 billion - $3 billion).

Key sources, bases and assumptions

The AstraZeneca forecasts and targets in this announcement and the presentation are derived from the AstraZeneca Long Range Plan for 2014 to 2023 (the "LRP"), the AstraZeneca papers produced to support the LRP and AstraZeneca papers subsequently produced as part of the business planning process. AstraZeneca produces a long range plan annually. The LRP was updated in the last quarter of 2013 and was reviewed by the Board of Directors in December 2013, and then, following revisions to reflect the acquisition of BMS’ interest in the Diabetes franchise, reviewed by the Board of Directors in January 2014. The forecasts and targets are based on AstraZeneca’s risk adjusted measures, where applicable.

Peak year sales referred to in this announcement and the presentation are AstraZeneca management estimates for the highest annual net sales. Estimates are made based on customary forecasting methodologies used in the pharmaceutical industry. Many of the peak year sales occur in years later than 2023, but are consistent with the plans and projections of the LRP period. Analyst estimates referred to in the announcement are set out in the slide presentation.

Peak year sales may occur in different years for each NME depending on trial outcomes, launch dates and exclusivity periods amongst other things. The aggregation is for the peak year sales of each NME and not for one particular year. The peak year sales are net sales at nominal values and are undiscounted.

Risk-adjusted peak year sales are non-risk adjusted peak year sales adjusted for the individual probability of launch of each NME and the probability of success in further life cycle management trials. Estimates for these probabilities are based on industry wide data for relevant clinical trials in the pharmaceutical industry at a similar stage of development.

The development life cycle of pharmaceutical products is such that there is a range of possible outcomes from clinical development driven by numerous variables including safety, efficacy and product labelling as well as commercial factors including the patient population, the competitive environment, pricing and reimbursement. Accordingly, the actual revenues achieved in due course will be different, perhaps materially so, from the risk adjusted sales figures in this announcement and the presentation and should be considered in this light.

In the case of the calculation of the aggregate risk-adjusted peak year sales potential of around $23 billion and non risk-adjusted peak year sales of around $63 billion, they each include each NME and key line extensions currently identified as in Phase III, Phase II and those in Phase I included in the LRP as launching before the end of 2023.

The long-term revenue targets in this announcement and the presentation are consistent with the LRP for the period 2014-2023 at constant exchange rates, reflecting net sales. They reflect revenue forecasts adjusted for the individual probability of launch of each NME and the probability of success in further life cycle management trials. Estimates for these probabilities are based on industry wide data for relevant clinical trials in the pharmaceutical industry at a similar stage of development.

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