Earnings slide by 33% at AstraZeneca

AstraZeneca, the second-largest UK drug maker, said fourth-quarter earnings fell 33 per cent as revenue declined for two of its best-selling drugs and the company spent more to develop and market new medicines.

Profit excluding certain items dropped to $1.18 billion, or 76 US cents a share, from $1.54 billion, or $1.23, the company said, and below expectations.

AstraZeneca also said it will buy rights to Actavis’s respiratory portfolio in the US and Canada for an initial payment of $600 million. The agreement covers drugs it bought from Almirall last year.

AstraZeneca, which turned down a $117 billion offer from Pfizer last year, faces increasing competition after its acid reflux drug Nexium lost patent protection and ahead of the 2016 expiration for the cholesterol pill Crestor.

The company said today that revenue in 2015 will probably decline by a mid- single-digit percentage, while adjusted earnings will rise at constant exchange rates.

The revenue estimate falls below what analysts predicted and “it’s not clear exactly how management intends to close the gap” to ensure earnings rise, Tim Anderson, an analyst at Sanford C. Bernstein said in a note.

The drugmaker will reduce general costs this year after spending more in 2014 to market new medicines, chief financial officer Marc Dunoyer said in an interview. The rate of growth in research and development spending will also slow, he said.

“We will reduce spending compared to 2014, which must be seen as a peak,” Mr Dunoyer said. “In 2014, we had this ability to invest more than we thought,” largely because a generic competitor for Nexium didn’t emerge.

Chief executive Pascal Soriot has promised investors that AstraZeneca will return to growth, with annual revenue of $45 billion by 2023. To do that, it's focusing on boosting sales of its heart and diabetes treatments, and developing new cancer drugs that may be worth $12 billion annually.

Sales of Brilinta, a blood-thinning medicine, climbed 45 per cent in the quarter to $133 million, a sign that Mr Soriot’s emphasis on the heart drug may be working. Revenue from diabetes drugs also rose.

Nexium revenue declined by 16 per cent, while Crestor sales dropped 5 per cent. The two medicines together accounted for a third of AstraZeneca’s 2013 revenue, or $9.5 billion.

The patent for Nexium expired in May, although no generic competitor is yet on the market. Total sales for the quarter totaled $6.68 billion.

“AstraZeneca has delivered a notably weak fourth quarter and a disappointing sales outlook for 2015,” said Alistair Campbell, an analyst at Berenberg. – Bloomberg