AstraZeneca PLC (AZN) Earnings

Management highlights

Overall Company Performance - Total H1 2026 revenue grew 6% year-over-year; excluding generic-impacted Farciga and Brilinta, total revenue grew 11%, demonstrating underlying portfolio strength. Core EPS grew 11% year-over-year, in line with full-year expectations. - Six positive Phase 3 program readouts were delivered in H1 2026, including 3 new molecular entities (NMEs). 30 major market approvals were secured, increasing the count of approved NMEs to 11 since the 20-by-2030 target was set, keeping the company on track to hit this goal. - Growth was delivered across the US, Europe, and emerging markets outside China. Growth in China was impacted by ongoing volume-based procurement effects; management expects recent NRDL additions and 2026 new approvals to drive future Chinese growth. Pipeline and R&D Progress - H1 2026 key positive readouts include: Sonivi (our first wholly-owned ADC) achieved statistically significant overall survival benefit in the Phase 3 Clarity Gastric O1 trial for 2nd-line+ Claudin 18.2-positive gastric cancer, with a lower expression threshold than competing products that expands eligible patient coverage to ~50% of this patient population; the Phase 3 Volga trial for Imfinzi in cisplatin-ineligible muscle-invasive bladder cancer met all key endpoints, expanding our bladder cancer indication portfolio; positive Phase 2b data for oral GLP-1 agonist Alecoglipron in obesity and type 2 diabetes demonstrated clinically meaningful weight loss and HbA1c reduction with a favorable safety profile, leading to initiation of a comprehensive Phase 3 program. - The disappointing top-line result of the CardioTransform trial for Wynua in transthyretin-mediated amyloid cardiomyopathy (ATTR-CM) was disclosed: the trial did not meet its primary endpoint of reducing cardiovascular events/mortality when added to standard-of-care stabilizer therapy, though a nominally significant benefit was seen in the monotherapy subgroup. - 25 key Phase 3 readouts are planned over the next 18 months, including 6 NME readouts in 2027 alone. Next-generation technology platforms (ADCs, bispecifics, cell therapies, T-cell engagers, oral cardiometabolic assets) are advancing rapidly to drive post-2030 growth, with 16 Phase 3 trials ongoing for next-generation bispecific immuno-oncology assets alone. Commercial and Capital Updates - Core R&D expense grew 6% in H1 2026, representing 23% of total revenue, in line with the full-year plan to invest in long-term pipeline growth. Core SG&A also grew 6%, reflecting pre-launch investments for recently approved and upcoming assets including Bexfendi and tozorakimab. - Capital expenditure totaled $1.5 billion in H1 2026, with full-year 2026 CapEx expected to increase ~33% year-over-year, with key investments including a new ADC manufacturing facility in Singapore. - The 2030 $80 billion revenue ambition is a risk-adjusted forecast; pipeline setbacks (such as the Wynua trial failure) were explicitly planned for, and management retains full confidence in hitting this target, with sufficient pipeline diversification to offset any expected setbacks.

Guidance

- Management reiterates full-year 2026 guidance: total revenue is expected to grow at a mid-to-high single-digit percentage rate, and core EPS is expected to grow at a low double-digit percentage rate, both at constant exchange rates. - Full-year 2026 core gross margin is expected to be stable to slightly higher versus 2025, with a lower gross margin expected in H2 2026 consistent with historical seasonal patterns for lower-margin products. Core R&D expense is expected to come in at the upper end of the low 20s percentage range (as a share of total revenue) for the full year. - 2026 full-year deal-related milestone payments from prior business development transactions are expected to total approximately $2.5 billion; year-to-date 2026 new BD transactions have totaled just over $2 billion in upfront payments. - Core finance costs are expected to be higher in H2 2026 compared to H1 2026, following early 2026 refinancing activities that increased interest rates and reduced interest income. - The 10 billion peak sales risk-adjusted potential for the 2026 cohort of readouts remains broadly intact: positive upward adjustments for tozorakimab and Sonivi offset the negative adjustment from Wynua, resulting in a net outcome close to the original 10 billion target.

Segment performance

1. Oncology: Total H1 2026 revenue grew 15% to $14.1 billion, contributing 46.7% of total company revenue. Key quarterly growth: Tegrisa (+6% QoQ to $1.9 billion), Calquence (+16% to over $1 billion, first time exceeding $1 billion in a single quarter), Infinzi/Imgudo (+25% aggregate), Inher2 (+31% to $888 million), TrueCap (+37% to $233 million), Datorary (+$55 million). Double-digit growth was delivered across all major regions, with 18% growth in the US and 16% growth in Europe. 2. Biopharmaceuticals: Total H1 2026 revenue declined 5% to $11.2 billion, contributing 37.1% of total company revenue. This decline reflected expected loss of exclusivity headwinds for Farciga, Brilinta, and Roxodustat, which was largely offset by growth in the respiratory and immunology segment (Q2 revenue grew 11% overall). Key Q2 performance: Fasenra (+13% to $570 million, 75% growth in emerging markets led by China launch), Tezspire (+45% to $390 million), Breztri (+20% to $346 million), Savnello (+24% to $209 million), Farciga (-90% overall due to generic entry in the US). 3. Rare Disease: Total H1 2026 revenue grew 11% to $4.9 billion, contributing 16.2% of total company revenue. Growth was driven by double-digit expansion across all key products: Ultomiris grew 12% driven by demand across all indications; Strensig grew 36% year-over-year, remaining one of AstraZeneca's fastest-growing blockbuster products; Coselugo maintained strong global momentum, retaining market leadership for pediatric patients with NF1PN. 4. Alliance Revenue: Grew 29% year-over-year in H1 2026, reflecting higher profit shares from partnered assets including Inher2, Dato-DXd, and Ktezfiro in markets where partners record product sales.

Risks & headwinds

- The inherent risk of transformative drug development means not all pipeline programs will succeed, as demonstrated by the failed CardioTransform trial for Wynua; unexpected trial failures can impact near-term pipeline value and growth projections. - Growth in China continues to face headwinds from volume-based procurement policies, and growing competition from local Chinese biopharma companies increases pricing and market share pressure in the region and globally over time. - Generic competition following loss of exclusivity for legacy products (including Farciga, Brilinta, and Roxodustat) creates expected but material top-line headwinds for the biopharmaceuticals segment that must be offset by growth from new products. - New MFN pricing rules in the US require longer negotiation timelines and may result in lower net pricing for new innovative products relative to historical levels, impacting near-term revenue per product. - Pipeline clinical trial success is never guaranteed: multiple late-stage trials across oncology, cardiology, and rare diseases are ongoing, and negative readouts could impact projected growth and revenue targets.

Analyst Q&A

• Q: What are AstraZeneca's expectations for oral PCSK9 inhibitor Lyraprostat ahead of its 2027 H1 readout, and how is it differentiated? /

  A: Management is excited about Lyraprostat's potential competitive profile against existing oral PCSK9 assets. A fixed-dose combination of Lyraprostat with rosuvastatin has already entered Phase 3, creating a unique all-oral single-tablet cholesterol-lowering option. The company is also developing a fixed-dose combination of Lyraprostat with Alecoglipron to address the common comorbidity of high cholesterol and excess weight, which further differentiates the portfolio. 150 characters.

• Q: What is the lifecycle development plan for Sonivi beyond the positive second-line gastric cancer Phase 3 readout? /

  A: The Clarity Gastric O2 Phase 3 trial is already ongoing for first-line gastric cancer, evaluating Sonivi in combination with chemotherapy, with separate cohorts for PD-L1 positive and PD-L1 negative populations to capture a broad first-line patient opportunity. Early-stage trials are also exploring Sonivi in other GI tract cancers including pancreatic and biliary tract cancers, which could significantly expand the total addressable patient population. 156 characters.

• Q: How does AstraZeneca expect the commercial dynamic between existing Strensic and upcoming Epsinphotase Alpha to play out for hypophosphatasia? /

  A: Epsinphotase Alpha is expected to have a broader geographic label coverage than Strensic, pending regulatory approval, and significantly better tolerability: Epsinphotase Alpha has an average of only 5 injection site reaction days per year, 5x lower than Strensic. Lower injection reaction rates improve patient retention, which is a key unmet need with Strensic, so management expects the new asset to grow the overall franchise size significantly rather than just replacing Strensic. 197 characters.

• Q: What is AstraZeneca's current outlook for the Chinese market, and what is the competitive threat from local Chinese biopharma companies? /

  A: Management remains bullish on China: the market size potential remains large, and the region's growing innovation ecosystem creates significant partnership opportunities for global development and commercialization. While local competition is intensifying (particularly in EGFR and ADC indications), AstraZeneca has learned to compete effectively and has adapted internal processes to match the speed of Chinese developers. Over time, some Chinese companies may expand globally, but global commercialization requires significant profit and infrastructure, which most local players do not yet have. 242 characters.

• Q: Is AstraZeneca's current Phase 3 pipeline sufficient to deliver growth beyond the 2032 main patent expiration period, or will additional large business development deals be required? /

  A: Management states the existing pipeline is already sufficient to meet long-term growth goals. The 2030 80 billion revenue target is a risk-adjusted forecast that accounts for average industry Phase 3 success rates, and AstraZeneca's historical trial success rate has been higher than the industry average. Recent pipeline additions like Zygfrovi and Sonivi have further strengthened existing franchises, so no large additional BD is needed to hit long-term targets. 201 characters