AstraZeneca warns of declining profits in 2016
Arrival of cheap generic rivals to cholesterol drug Crestor expected to affect revenue
Chief executive Pascal Soriot said AstraZeneca faced a “transitional period” due to the expiry of Crestor’s US patent in May, but the company was poised for a comeback and it would continue to plough investment into drug research
AstraZeneca warned on Thursday that revenue and earnings would drop this year due to the arrival of cheap generic rivals to Crestor, its top-selling cholesterol drug, which will offset growth in sales of newer medicines.
The drugmaker, which saw off a takeover attempt by Pfizer in 2014, is expected to see a trough in profits this year and next before a hoped-for resurgence on the back of a promising pipeline of experimental drugs.
For 2016, AstraZeneca said that would mean a low to mid single-digit percentage decline in both revenue and core earnings per share, which exclude certain items, at constant exchange rates.
With currencies expected to have a further adverse impact of about 3 per cent, the downbeat outlook had dragged the shares down.
Many investors had expected AstraZeneca to predict broadly flat earnings in 2016, in part because long-term management incentives are tied to keeping earnings at or above $4.20 a share. The new guidance implies a figure of about $4.
Chief executive Pascal Soriot said AstraZeneca faced a “transitional period” due to the expiry of Crestor’s US patent in May, but the company was poised for a comeback and it would continue to plough investment into drug research.
R&D spending this year is expected to stay around 2015 levels.
“Clearly, 2016 will be a challenging year due to the loss of exclusivity for Crestor in the United States. It is a very, very big product,” Mr Soriot said.
But he reiterated AstraZeneca’s ambition to build a business with annual sales of at least $45 billion by 2023, up from $24.7 billion in 2015.
Revenue in the fourth quarter of last year fell 5 per cent to $6.4 billion, hit by earlier drug patent expiries, generating core earnings per share of 94 US cents, up 26 per cent. Industry analysts had on average forecast sales of $6.29 billion and earnings of 95 cents.