Shares in the UK’s largest listed company AstraZeneca (AZN) last month hit a new all-time high at £118.02 and its latest update suggests everything is going well for the business.

Fourth quarter and full-year results published on 9 February beat market estimates and came in towards the top end of company guidance accompanied by an upbeat outlook for 2023.

AstraZeneca is expected to initiate more than 30 late-stage trials in 2023 of which 10 have the potential to generate peak sales of more than $1 billion. Chief executive Pascal Soriot said the company obtained 34 new drug approvals in 2022 and is on track to deliver at least 15 new drugs before 2030.

For reference, in 2022 AstraZeneca had sales of $44.35 billion and adjusted net income of $10.3 billion. The sheer size of the business requires new blockbuster drugs to be developed to move the growth needle.

One potential fly in the ointment for 2023 is the significant expected decline in Covid-19 related sales. This will restrict total sales growth to a mere low to mid-single digits, according to the company. The US regulator has removed emergency use status for AstraZeneca’s antibody Covid-19 drug Evusheld due to its ineffectiveness against certain variants of the virus.

Meanwhile, sales of the Oxford-AstraZeneca vaccine Vaxzevria are expected to be minimal. Sean Conroy, an analyst at Shore Capital, estimates no sales from the vaccine in 2024. The good news is that lower Covid-19-related sales improves group margins. Conroy has increased his gross margin assumptions to reflect the favourable sales mix.

The ramp-up of late-stage trials in 2023 and build-up of marketing expenses ahead of new drug launches is expected to increase operating costs for the group in the low to mid-digits.

Despite lower overall sales growth AstraZeneca has guided for core earnings per share growth in the high single digits to low teens for 2023. Conroy lowered his prior estimate by 7% to bring it in line with consensus at $7.31, implying growth of around 10%.

Longer-term, analysts expect the strong pipeline of new drugs across AstraZeneca’s cancer and cardiovascular franchises to bear fruit and sustain above-sector earnings growth.

AstraZeneca has been one of the best performing shares over the past decade, up 287% compared with 30% for the FTSE All-Share. On a total return basis, the outperformance is even more pronounced. AstraZeneca has returned 447% with dividends reinvested versus 85% from the FTSE All-Share, according to FE Analytics data.

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