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There are advantages to being an underdog. A decade ago, AstraZeneca’s growth forecasts were often derided, yet it had the benefit of surprise when it did start to deliver.
Now, as the UK’s most valuable company with a market capitalisation within sight of £200bn, AstraZeneca is one of the darlings of the European pharmaceutical sector. That brings high expectations, as its chief executive Pascal Soriot knows after he set a target last month to nearly double revenues to $80bn by the end of the decade.
The reaction to this eye-catching goal, unveiled at its first investor day in 10 years, was initially muted. Partly this was down to anticipation: some analysts had already upped their 2030 revenue estimates. AstraZeneca’s shares have since risen to hit fresh highs. It trades at a forward price/earnings multiple just over its 10-year average of 18.1 times. Strong data from late-stage trials over the next 18 months will be needed to convince investors AstraZeneca can push on further.
Soriot expects more than 40 readouts from phase 3 trials by the end of 2025, although most will fall into next year. Still, not many European pharma groups can point to that sort of schedule, says Quilter Cheviot healthcare analyst Sheena Berry.
AstraZeneca reckons successful medicines from these trials could generate $20bn in revenue by 2030. Even if that estimate is not risk adjusted, it means investors will have a pretty solid view within the next 18 months of whether the uplift from 2023’s $45.8bn revenues is achievable. The $80bn target does not include any revenue contribution from future potential deals — a fallback if trial results flop.
Half of the 20 new medicines AstraZeneca expects to launch by the end of the decade will come from its biopharma division. This is often overlooked compared with its high-profile oncology business but is responsible for AstraZeneca’s best-selling drug Farxiga. The diabetes treatment generated nearly $6bn in sales in 2023. Farxiga starts to lose patent protections from 2026 yet AstraZeneca hopes to use it in combination with other medicines — to preserve kidney function for patients with chronic kidney disease for instance — to avoid revenues falling off a cliff.
There are other risks. Farxiga is involved in the first round of US drug price negotiations. Drug development offers zero guarantees, as Soriot well knows. AstraZeneca commits a fairly chunky fifth of annual revenues to research and development.
Soriot’s team has assessed its pipeline chances using average industry success rates. Currently it hits above these. That is some comfort that the latest big revenue target is within AstraZeneca’s reach.
nathalie.thomas@ft.com