AstraZeneca reported strong second quarter earnings on Friday, beating analyst estimates despite declines in COVID-19 revenue and the loss of exclusivity on several key drugs. The British-Swedish pharmaceutical company posted $22 billion in revenue for the first half of 2023, representing 4% growth over the same period last year.

Revenue from COVID-19 medicines fell to just $2 million in the first half, down from $1.17 billion in the first half of 2022, as demand dropped off significantly. However, excluding all COVID-related sales, AstraZeneca’s revenues rose 16% year-over-year in the first two quarters.

“Each of our non-COVID-19 therapy areas saw double-digit revenue growth, with eight medicines delivering more than $1 billion of revenue in the first half, demonstrating the strength of our business,” said CEO Pascal Soriot in an earnings statement.

Top performers included the rare blood disorder treatment Ultomiris, up 64%, the lung cancer drug Imfinzi, up 57%, and the type 2 diabetes medicine Farxiga, up 40%.

However, revenues declined for Symbicort, AstraZeneca’s blockbuster asthma and COPD inhaler, which faces generic competition in the U.S. The company kept its full-year earnings forecast unchanged despite the strong first half results, citing the loss of exclusivity on Symbicort and other drugs.

China Fuels AstraZeneca’s Growth

China represents around $6 billion in annual revenue for AstraZeneca and is a key growth driver, with the company holding the largest market share among global drugmakers in the country.

While AstraZeneca has reportedly considered spinning off its Chinese operations into a separate Hong Kong-listed business, CFO Aradhana Sarin dismissed it as a rumor and reiterated the company’s commitment to China.

“We see opportunities to license our drugs with Chinese partners as an avenue for future growth,” Sarin stated. “There has been major investment and expansion in China’s biotech sector, and we can leverage our expertise to identify the right targets and partnerships.”

AstraZeneca Splits From PhRMA Lobby

In a move that reflects shifting political priorities, AstraZeneca recently withdrew its membership from PhRMA, the powerful U.S. drug industry lobbying group.

The company has not joined other pharmaceutical firms in suing the U.S. government over drug pricing reforms in the Inflation Reduction Act. According to Sarin, AstraZeneca will redirect PhRMA funds towards patient-focused initiatives like improving clinical trial diversity and strengthening healthcare systems.

“We are finding different avenues to support policies that benefit patients,” she said. The company appears to be charting a more independent course in navigating policy and regulations.

Strong Oncology Portfolio Drives Growth

AstraZeneca has sharpened its focus on developing innovative cancer therapies, and its oncology portfolio is paying dividends.

Imfinzi brought in $2.25 billion in the first half of 2023, making it AstraZeneca’s second highest-grossing medicine after Tagrisso, its blockbuster lung cancer treatment. Imfinzi holds approvals for treating several types of lung and bladder cancers.

Enhertu, a breast cancer therapy AstraZeneca co-developed with Japan’s Daiichi Sankyo, delivered $630 million in sales, up 66% over last year. Lynparza, a PARP inhibitor for ovarian and breast cancers, generated $1.13 billion.

AstraZeneca has one of the deepest oncology pipelines in the industry, with 177 projects under development. The company’s focus on specialized cancer medicines positions it well for long-term growth as demand increases globally.

Outlook Remains Strong Despite Headwinds

With over 170 medications in late-stage trials, AstraZeneca has a robust pipeline that should support growth for years to come despite near-term challenges.

The company faces pricing pressures in the U.S. market due to high inflation and reforms targeting drug costs. Meanwhile, the loss of exclusivity on Symbicort, Pulmicort, and several other medicines will dent revenues.

However, AstraZeneca’s investments in R&D and productive partnerships have built a deep roster of promising new therapies. The company’s strategic focus on oncology, immunology, cardio-metabolic disease, and rare diseases places it at the forefront of high-growth therapy areas.

While near-term patent expiries create uncertainty, AstraZeneca has charted a course for long-term growth driven by innovation in areas of major unmet need. Savvy pipeline investments position the company well to deliver life-changing medicines to patients worldwide.

The Bottom Line

Despite declines in pandemic-related sales and looming generic competition, AstraZeneca delivered a solid first half performance. The company’s strategic focus on targeted therapy areas and productive R&D investments will support growth for years to come.

AstraZeneca remains well positioned to develop transformative new medicines that advance patient care globally. While short-term hurdles remain, the company’s long view on innovation leaves it poised for sustained success.