Oncology and China have been the main driving forces of AstraZeneca’s growth for some time now. But in the last three months of 2019, three of its key cancer meds have missed their sales marks, just as the ongoing coronavirus outbreak is threatening its business in China.
Lung cancer drug Tagrisso, AstraZeneca’s top-selling product, racked up sales of $884 million in the fourth quarter. It marked an impressive 49% year-over-year jump but still missed industry watchers’ previous expectations by 4.4%, as Jefferies analyst Peter Welford noted in an investor's report Friday.
PARP inhibitor Lynparza’s $351 million and PD-L1 inhibitor Imfinzi’s $424 million during the period both came below consensus expectations, by 2.2% and 7%, respectively. That shortfall came even as Lynparza crossed the blockbuster threshold for the first time to reach $1.2 billion.
During a press conference Friday, AstraZeneca management largely attributed the numbers to normal quarterly fluctuations rather than a general trend moving forward.
A price cut in Japan and an inventory increase in the U.S. in the third quarter had dented Tagrisso’s sales the following period. In 2020, AZ’s still confident Tagrisso will continue to grow with “the usual deviations” from quarter to quarter, AZ’s oncology business head David Fredrickson told reporters.
In the U.S., Tagrisso has now established itself as the standard of care for newly diagnosed EGFR-mutated non-small cell lung cancer patients, with about a two-thirds share of new patients, he explained. Therefore, growth going forward in the country will be “incremental.”
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“The growth will come from further increases in total prescriptions as the duration of therapy extends,” Fredrickson said. “There will still be some incremental growth in new patients starts in the U.S. as we continue to go after patients that today are treated with [immuno-oncology] therapies that should be treated instead with EGFR-directed therapy.”
He acknowledged those are small opportunities. The really big growth driver lies in other parts of the world, especially Asia, where EGFR mutation is about twice as prevalent as in Western countries. He noted that of the 80 first-line approvals Tagrisso now boasts around the world, only 18 countries have approved reimbursement so far.
In China, the company expects the new use to be included in the country’s National Reimbursement Drug List at the end of this year. But in AZ’s home country, the National Institute for Health and Care Excellence recently declined to cover the med in previously untreated patients in England.
Speaking of China, sales in the country during the fourth quarter increased by 28% at constant currencies to $1.19 billion, which accounted for 19% of AZ’s total quarterly haul of $6.25 billion.
That's not to say everything is rosy in the China market. Implementation of a bulk procurement program’s starting to take a toll on AZ's cholesterol drug Crestor. The aging med saw its sales in emerging markets drop 12% in the fourth quarter to $185 million, mainly because of that price-cutting project.
Nevertheless, 28% growth in the country is, as Wolfe Pharma analyst Tim Anderson put it in a Friday note, “impressive, once again.” It’s also far better than the mid-teens growth rate AZ has projected for its business there in the midterm.
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As the Chinese government’s funding innovation by looking for savings from older products, “this over time will affect us,” CEO Pascal Soriot said. “Some companies are affected very strongly and quickly; in our case it will cover for the next two, three, four years.”
However, there is a more imminent threat—the ongoing coronavirus outbreak in China. As of Friday, the disease, COVID-19, has led to nearly 64,000 human infections in China, having claimed 1,382 lives. As the city of Wuhan remains on lockdown, other parts of the country are on high vigilance to the extent that normal business activities are being affected.
Overall, AZ hasn’t seen any disruption in its local operations, Soriot said. Following an extended closure during Chinese New Year as suggested by the government, its two manufacturing sites in Wuxi and Taizhou are now expected to run at full capacity next week. It does export products from China to other parts of the world, but they only account for a low single-digit percentage of sales.
The company already sees impact on clinical drug development for one trial and is taking “appropriate steps to ensure continuity” of its R&D, the chief executive added.
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Because of China's status as a major growth point for AstraZeneca, it's more vulnerable than its peers to fallout from the epidemic. Assuming a negative impact from the China COVID-19 outbreak, the British pharma now expects 2020 total revenue to increase at a high single-digit to low double-digit percentage rate, Chief Financial Officer Marc Dunoyer told reporters. There’s still some uncertainty in the situation, he said, adding that the company will provide an update along with its first-quarter report.
The growth will be based on 2019 full-year sales of $23.56 billion, which marked a 15% jump at constant exchange rates over the previous year. AZ shifted the headline reporting measurement from “sales” to “revenue” in anticipation of some major collaboration revenue moving forward from potentially blockbuster launches.
Toward the end of last year, AZ and partner Daiichi Sankyo won a quick FDA nod for antibody-drug conjugate Enhertu, which Fredrickson said “has the opportunity to be the absolute best medicine in HER2-positive breast cancer space.” Enhertu sales in the U.S. and certain European countries are booked by Daiichi, and profits shared will be accounted for as collaboration revenue by AZ.
Plus, AZ doesn’t record Chinese sales of its FibroGen-partnered, first-in-class anemia drug roxadustat. SVB Leerink analyst Geoffrey Porges previously projected the drug could get $1.4 billion in 2025 sales from China alone.