Bloomberg News

AstraZeneca Sees Bigger Drop in 2014 Profit Than Analysts (2)

February 06, 2014

AstraZeneca Plc (AZN) forecast that profit and sales will decline more than analysts estimated as the U.K.’s second-largest drugmaker struggles with generic competition to its best-selling medicines.

Revenue will fall by a low- to mid-single-digit percentage at constant exchange rates, while earnings per share excluding some items will decrease by a percentage in the teens, the London-based company said today in a statement. Analysts had been expecting a decline of about 1.2 percent in sales and about 10 percent in earnings, according to data compiled by Bloomberg.

AstraZeneca is pursuing purchases and licensing deals to buffer the decline in sales of products including heartburn pill Nexium and cholesterol treatment Crestor as their patents expire over the next three years. Nexium brought in $3.87 billion last year, while Crestor generated $5.62 billion. The two drugs account for more than a third of revenue.

“The outlook was slightly on the soft side,” Erik Hultgard, an analyst with Nordea who recommends buying AstraZeneca shares, said by phone. “What’s important is the long-term outlook and what happens beyond 2017.”

Shares Fall

AstraZeneca said Jan. 14 that revenue in 2017 will be similar to last year’s sales following the purchase of Bristol-Myers Squibb Co.’s stake in their diabetes-treatment venture for as much as $4.3 billion. Hultgard said the company expects to save an additional $300 million a year from restructuring by 2016, and that will lead to more investment in research.

AstraZeneca fell 1.6 percent to 3,815.50 pence at 4:30 p.m. in London, giving the drugmaker a market value of 48.1 billion pounds ($78.6 billion). Before today, the stock had gained 34 percent in a year including reinvested dividends, compared with a 21 percent return in the Bloomberg Europe Pharmaceutical Index.

Fourth-quarter profit excluding restructuring costs and certain other items declined 26 percent at constant exchange rates to $1.98 billion, AstraZeneca said. On that basis, earnings were $1.23 a share, beating the $1.18 average estimate of 13 analysts compiled by Bloomberg.

“Our journey starts with rebuilding our pipeline,” Chief Executive Officer Pascal Soriot told reporters today. “We’re building momentum, but there is still a lot of work ahead.”

Crestor Sales

Revenue for the quarter slid 4 percent at constant exchange rates to $6.84 billion, in line with the $6.82 billion average estimate of 15 analysts surveyed by Bloomberg. Revenue for the full year fell 6 percent, compared with a company forecast of a “mid- to high-single-digit percentage” decline.

Sales of Crestor were down 8 percent at constant exchange rates to $1.46 billion, while sales of the ulcer pill Nexium fell 3 percent to $991 million. Sales of lung therapy Symbicort rose 11 percent as a rival treatment from GlaxoSmithKline Plc, Britain’s biggest drugmaker, lost U.S. market share. Symbicort sales rose 28 percent in the U.S. and more than doubled in China, where Glaxo is facing a bribery investigation.

Sales of Brilinta, which is sold in Europe as Brilique, were $92 million, up from $38 million a year earlier, beating the $83.5 million average estimate of 11 analysts compiled by Bloomberg. The blood-thinner, which was approved in the U.S. in 2011, could have blockbuster sales of $1.05 billion by 2017, according to the average estimate of 12 analysts.

Dividend Payment

The Bristol-Myers diabetes deal gave AstraZeneca control of new treatments such as Farxiga, which was approved in the U.S. last month. The company also takes on 4,000 employees from Bristol-Myers.

The company proposed a second interim dividend of $1.90, leaving the full-year payout unchanged from a year ago at $2.80 and decided not to resume buying back shares. AstraZeneca suspended its $4.5 billion stock buyback program for 2012 on Soriot’s first day on the job so the company could pursue licensing and acquisition deals.

AstraZeneca has 11 medicines in late-stage trials, almost double the number a year earlier, with 19 possibly entering late-stage trials in the next two years.

The company may opt to license several them and has already attracted interest from potential partners, Soriot said in an interview.

“We suddenly have to be very focused and very selective in those but the good news is we have a lot to choose from,” Soriot told analysts today.

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

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


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