AstraZeneca Lifts Forecast, Buyback Amid Brilinta Win
July 29, 2010, 12:24 PM EDTBy Trista Kelley
(Adds closing share price in fifth paragraph.)
July 29 (Bloomberg) -- AstraZeneca Plc raised its earnings forecast for the third time this year and doubled a share buyback plan as the anti-clot drug Brilinta moved one step closer to approval and a U.S. court upheld a patent on the Crestor cholesterol medicine.
Second-quarter profit excluding some items rose to $1.79 per share from $1.64 a share, beating the average estimate of $1.58 from 24 analysts surveyed by Bloomberg. Earnings for the year will be $6.35 to $6.65 a share, up from a previous goal of $6.05 to $6.35, the London-based company said in a statementtoday. AstraZeneca aims to buy back $2 billion of shares in 2010, up from a previous target of $1 billion.
The U.K.’s second-largest drugmaker won the backing of a Food and Drug Administration advisory panel yesterday for approval of Brilinta, a potential rival to Sanofi-Aventis SA and Bristol-Myers Squibb Co.’s Plavix, which had $9.8 billion in sales last year. The company also won a legal victory last month when a U.S. court upheld a patent on Crestor, removing a threat to the drug’s $4.5 billion in revenue.
“AstraZeneca continues to surprise the market positively, from Crestor and Brilinta to strong sales growth and good cost management,” said Michael Leacock, a Royal Bank of Scotland analyst who rates the stock a ‘buy,’ in an e-mail.
AstraZeneca rose 86.5 pence, or 2.7 percent, to 3,289 pence at the 4:30 p.m. close of trading in London, the highest since October 2006.
FDA Panel Vote
Outside advisers to the Food and Drug Administration voted 7-1 yesterday in favor of using Brilinta to reduce the risk of heart attacks, strokes and death in patients with severe chest pain or earlier heart attacks. The FDA is scheduled to decide on Brilinta in September.
“Regulatory process goes in steps and yesterday was a very important step,” Chief Executive Officer David Brennan said on a conference call today. “It’s something we’re really excited about because it’s a really good medicine,” he said in an interview, also today.
The Crestor ruling stoked analyst expectations that the company would return more of its $9.4 billion in cash and short- term investments to shareholders. AstraZeneca’s expanded buyback plan matched the expectations of six out of eight analysts surveyed by Bloomberg.
“We increased it because we’ve seen a better business performance in the first half of the year,” Brennan said in the interview. “We’ll talk about it again at the end of January when we give our year-end results.”
Small Acquisitions
AstraZeneca is relying on small acquisitions, expansion in emerging markets and treatments from its own labs to replenish revenue over the next four years as patents expire on top- sellers Nexium for ulcers and the antipsychotic Seroquel, medicines that generated a combined $9.83 billion last year.
“We now see earnings momentum slowing as patent expiries bite,” Leacock wrote in a note to investors on July 27.
Brennan has said that sales and earnings will “fluctuate” until 2014, and that he needs $4 billion to $6 billion in new sales to meet a revenue target of $28 billion to $34 billion by then. Revenue reached $32.8 billion in 2009. Brilinta sales could reach $1.47 billion by 2016, according to the average estimate of three analysts surveyed by Bloomberg.
The drugmaker also aims to boost sales from emerging economies such as China to 25 percent of annual revenue by 2014.
Nine Markets
Brennan said today the company will attempt to introduce Brilinta in nine markets other than the U.S., including Europe, Canada and Brazil.
Second-quarter net income gained to $2.11 billion from $1.71 billion a year earlier, the company said today. Sales increased to $8.18 billion from $7.96 billion.
“The second half will be difficult, but better than our original expectations due to the timings of generic entry” to key drugs, Chief Financial Officer Simon Lowth said today on a conference call with journalists.
Lowth said the company will update investors on possible future buyback plans in January 2011. Buybacks and dividends are “not contingent on the outcome of any product in any one market,” he said.
The company’s forecasted earnings excludes certain charges, such as those related to its cost-cutting plan and to the acquisition of MedImmune Inc. in 2007. London-based GlaxoSmithKline Plc is the U.K.’s biggest drugmaker.
--Editors: Kristen Hallam, Phil Serafino
To contact the reporter on this story: Trista Kelley in London at tkelley2@bloomberg.net
To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net
