AstraZenecas(LSE: AZN) first-half results beat expectations but once the dust surrounding the release died down, analysts started to pick holes in the companys numbers.
A key figure that attracted analysts attention was the level of revenue stemming from Astrasexternalisation deals. These deals are part of managements plan to boost short-termrevenuewhile outsourcingdrug development costs to other parties.
However, while Astrasexternalisation deals are boosting figures now, theres concern that the company is selling off some potentially lucrative treatments at knock-down prices.
Growing sales
Astra reported organic sales of $11.6bn for the first-half of 2015, down 10% year-on-year. Including an additional $800m from externalisation deals, sales only declined 6% year-on-year, which is a significant improvement.
Astra has been busy offloading non-core drugs this year. Some of the assets divested include an experimental dementia drug, which was placed into a partnership withEli Lillyof the US, co-marketing rights for a new constipation pill sold to Daiichi Sankyo of Japan for $200m, and all non-US rights for Entocort, a treatment for Crohns disease.
Other largerexternalisation deals include a $450m collaboration on immunotherapies withCelgene, one of the biggest names in the US biotech industry.
City analysts believe that these deals are misleading shareholders. They have been calledfill-the-gap revenue deals of questionable sustainability. Moreover, Astras management has been accused of engineering earnings by using these deals to help the group meet lofty growth targets.
Still, theres no denying that Astras turnaround is taking shape. Indeed, while some analysts may be sceptical about the sustainabilityof the companys revenue growth, group costs are falling, and Astra has an exciting pipeline of new treatments under development.
The group is expecting to receive the approval for twonew drugs Iressa (lung cancer) and Faslodex (breast cancer) during the second half of 2015. Regulatory submissions for new lung cancer and ovariantumoursmedication is also expected.
But the most exciting drug Astra has under development at present is AZD9291.
Exciting prospects
AZD9291, which is yet to receive a proper name, is being pushed through the development pipeline at breakneck speed. The drug is designed for the treatment forlung cancer and has been undergoing clinical tests for two years. Astra has already submitted AZD9291 for regulatory approval, and if approved, the treatment could catapultAstras sales higher.
All in all, Astrahas more than 50 treatment trials planned for this year, with several launches planned between now and 2017.According to City analysts, three of these treatments have the potential to be blockbusters, which can return the company to growth by 2017; as targeted by management.
Astra is expected to generate $6.9bn of oncology franchise sales by 2023, up from a low of $2.8bn reported this year. Profit margins are expected to expand significantly over this period. In total, Astra has 222 new products under development.
Paid to wait
It will take time for Astra to return to growth, but the company is one of the FTSE 100s dividend champions, and investors will be paid to wait.
At present, Astra supports an attractive dividend yield of 4.2%, and this payout should be here to stay, as it islinked to management compensation.
Dependable dividends are not easy to find, there are plenty of companies out there that have cut their payouts at a moment’s notice.
With this in mind, if you’re looking for dependable dividend payers then why not check out theMotley Fool’s new free report.
The report is titled“How To Create Dividends For Life”and outlines thefive golden rulesfor building a dividend portfolio.
Click hereto download your free copy today!
Rupert Hargreaves owns shares of AstraZeneca. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.