Bloomberg News

AstraZeneca Raises Forecast After Profit More Than Doubles

October 27, 2011

(Updates with closing share price in fifth paragraph.)

Oct. 27 (Bloomberg) -- AstraZeneca Plc, the U.K.’s second- biggest drugmaker, raised its profit forecast after third- quarter net income more than doubled, helped by gains from the sale of its Astra Tech dental-implant unit.

Net income increased to $3.48 billion from $1.55 billion a year earlier, the London-based company said today in a statement. Profit matched the $3.48 billion average of 10 analyst estimates compiled by Bloomberg. Sales rose 4 percent to $8.21 billion, compared with the $8.16 billion average estimate of 26 analysts surveyed by Bloomberg.

The $1.8 billion sale of dental-implant and surgical- equipment maker Astra Tech to Dentsply International Inc. in August resulted in a gain of $1.08 a share in the quarter. The manufacturer now expects core earnings per share, which exclude reorganization and other one-time costs, in a range of $7.20 to $7.40 this year, compared with $7.05 to $7.35 previously. Third- quarter profit on that basis rose to $1.71 a share from $1.50, beating the $1.70 average estimate of 16 analysts.

“Overall it’s a good set of numbers,” Amit Roy, an analyst with Nomura in London, said in an interview today. “The buyback is on track and there was a slight tweak to the EPS forecast. Basically the beat was on financial income.”

Shares Gain

AstraZeneca rose 1.3 percent to 3,080.50 pence in London. The stock has gained 12 percent this year including reinvested dividends, compared with a 6.7 percent increase in the Bloomberg Europe Pharmaceutical Index.

The company said it plans to buy back about $5 billion in stock in 2011, and has repurchased $3.88 billion the first three quarters.

“We’d be inclined to take profits today barring hints of substantial incremental cost reductions or particularly bullish commentary on near-term pipeline events,” Seamus Fernandez, an analyst with Leerink Swann, said in a note today.

In a separate statement, the company said the U.S. Food and Drug Administration delayed a decision on experimental diabetes pill dapagliflozin by three months. AstraZeneca and partner Bristol-Myers Squibb Co. are responding to an FDA request for additional data from completed and ongoing late-stage trials of the drug, AstraZeneca said.

Health-Care Overhaul

AstraZeneca’s profit has been curbed by German and U.K. government efforts to limit medical budgets, while U.S. health- policy overhauls have held back earnings growth in that market. The company’s Arimidex and Casodex cancer treatments lost patent protection last year, and competition for cholesterol drug Crestor will grow when generic copies of Pfizer Inc.’s rival Lipitor go on sale in November.

The company faces about $700 million in costs related to health-care reform in the U.S. this year, Chief Financial Officer Simon Lowth told journalists today on a conference call. He expects government price cuts in the U.S. and Europe to further weigh on the company in 2012.

“We delivered quarterly results in line with our expectations, against the backdrop of some pretty difficult market conditions,” Lowth said today.

AstraZeneca’s biggest-selling drug is Crestor, which generated $5.6 billion in sales last year. Revenue from the treatment increased 21 percent to $1.66 billion in the third quarter. Lowth said the company doesn’t expect “a significant switch” of patients to generic Lipitor, although prices will be under pressure after the cheaper rival hits the market.

Crestor Prices

“Crestor was a beat based on a price increases,” Roy said. “Lipitor goes generic in the fourth quarter, which is an excuse for statin makers to jack up the prices.”

The gain in Crestor was offset by a decline in Nexium sales, which fell 16 percent in the U.S, Roy said. The company attributed the decline to lower-than-average selling prices, which were down 10 percent from a year ago due to U.S. health- care reform.

Patents on ulcer treatment Nexium and antipsychotic medication Seroquel, which together accounted for more than $10 billion in revenue last year, expire by 2014. Sales of the two products generated about $2.5 billion in the quarter.

AstraZeneca received U.S. regulatory clearance for blood- thinner Brilinta in July. The drug is now approved in 47 countries, and is reimbursed in nine, the company said today.

--Editors: Kristen Hallam, Robert Valpuesta

To contact the reporter on this story: Allison Connolly in Frankfurt at aconnolly4@bloomberg.net.

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net.


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