Delivering 20 New Medicines By 2030 Will Strengthen Future Prospects

Key Takeaways

• AstraZeneca's strong pipeline and transformative technologies are set to boost long-term revenue and net margins significantly.
  
• Manufacturing expansion and emerging market growth are poised to meet product demand and sustain future revenue growth.
  
• Financial penalties from China investigations and inclusion in the VBP program could impact AstraZeneca's margins and revenue growth amidst increasing global competitive pressures.

Catalysts

A biopharmaceutical company, focuses on the discovery, development, manufacture, and commercialization of prescription medicines.

• AstraZeneca plans to deliver 20 new medicines by 2030 and has already approved 8 new medicines, which signals a robust pipeline that can contribute to future revenue growth.
  
• The company anticipates a significant impact from high-value trial readouts in 2025, with potential to generate over $15 billion in peak revenue from these trials. Success in these trials could increase overall earnings.
  
• AstraZeneca is expanding its global manufacturing capabilities, including new sites for ADCs, cell therapies, and other transformative technologies, enabling them to meet growing product demand and increase revenue.
  
• AstraZeneca continues to explore emerging markets, expecting strong growth due to increased healthcare investment and unmet medical needs, contributing to sustained revenue growth.
  
• The company focuses on transformative technologies beyond 2030, such as bispecifics, CAR-T therapies, and ADCs, which could drive long-term revenue growth and influence net margins due to higher-value products.

AstraZeneca Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming AstraZeneca's revenue will grow by 6.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from 13.0% today to 21.0% in 3 years time.
• Analysts expect earnings to reach $13.6 billion (and earnings per share of $8.91) by about February 2028, up from $7.0 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $15.9 billion in earnings, and the most bearish expecting $11.7 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 24.4x on those 2028 earnings, down from 32.6x today. This future PE is lower than the current PE for the GB Pharmaceuticals industry at 30.9x.
• Analysts expect the number of shares outstanding to grow by 0.1% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.4%, as per the Simply Wall St company report.

AstraZeneca Future Earnings Per Share Growth

Risks

• Ongoing investigations in China could lead to significant financial penalties for AstraZeneca, potentially impacting net margins and earnings.
  
• The inclusion of several medicines in China's Volume-Based Procurement (VBP) program represents a headwind, possibly affecting revenue growth in that key geography.
  
• The Part D redesign in the United States, along with pressures from biosimilars and other price actions in Europe, are expected to contribute to declining gross margins, impacting profitability.
  
• Increased competition in some therapy areas, such as biopharmaceuticals and oncology, including potential new entries from competitors, may pressure AstraZeneca’s product sales and revenue growth.
  
• Continued high levels of capital and R&D investment mean operating leverage improvement is crucial to achieving AstraZeneca's mid-30s operating margin by 2026, posing risks if revenue growth doesn't keep pace with cost expansion.

Valuation

• The analysts have a consensus price target of £140.0 for AstraZeneca based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of £189.47, and the most bearish reporting a price target of just £107.7.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $64.6 billion, earnings will come to $13.6 billion, and it would be trading on a PE ratio of 24.4x, assuming you use a discount rate of 6.4%.
  
• Given the current share price of £117.08, the analyst price target of £140.0 is 16.4% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.