Astra moves to profit from Covid-19 vaccine as earnings fall short

AstraZeneca Plc said it’s moving to profit from the Covid-19 vaccine it developed with the University of Oxford as new orders are received after supplying the shot at cost during the pandemic. 

The company will “progressively” transition to vaccine profitability from the fourth quarter, Astra said in its quarterly earnings report Friday. The gains will offset costs related to its Covid antibody cocktail, Astra said. The shares dropped after earnings in the quarter missed analysts’ estimates. 

Throughout the Covid crisis, Astra has said it wouldn’t take a profit from the vaccine “during the pandemic.” The company is making the move even as infection rates rise in many regions, including Europe.  

Astra and Oxford created one of the first coronavirus vaccines, receiving authorization from the U.K. in December. The company has looked on as Pfizer Inc. and Moderna Inc., which rolled out successful vaccines around the same time, have made billions of dollars in sales from their shots. Astra has said it will only take a profit from wealthier nations and continue to provide the vaccine to low- and- middle-income countries at cost for far longer.  

Pfizer has said the shot it developed with BioNTech SE -- the best-selling pharmaceutical product of all time in a given year -- is expected to bring in $36 billion in sales in 2021. Astra’s Covid vaccine revenues were $1.05 billion in the quarter. 

“The company is now expecting to progressively transition the vaccine to modest profitability as new orders are received,” Astra said in a statement. Covid vaccine sales in the fourth quarter are expected to be a “blend of the original pandemic agreements and new orders, with the large majority coming from pandemic agreements.”  

What Bloomberg Intelligence Says: 

A messy quarter, with a 13% EPS miss but reiterated guidance, suggests AstraZeneca has a cost-phasing issue, and consequently needs to beat 4Q consensus even to make the bottom end of its reiterated range. A slight revenue miss ex-Covid-19 vaccine was driven mainly by Tagrisso, but focus will be on on whether the EPS miss is down to a lack of appreciation for the newly-incorporated Alexion cost base or frontloading of launch costs. A reiteration of guidance suggests the latter, though Astra has chosen to incorporate some first-time vaccine profit into guidance, but not amend it. 

-- Sam Fazeli, BI pharma analyst 

Astra’s Confusing 3Q Leaves It Needing Strong 4Q: React 

The development comes after the company said this week it is creating a new unit to house its Covid assets, raising questions over whether it would look to push further into the vaccines space or spin off the business at some point. Astra only had one nasal flu spray before the pandemic. 

Astra reiterated its outlook for the year following the acquisition of rare-disease specialist Alexion Pharmaceuticals Inc.