AstraZeneca profits fall as patent losses bite

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Pascal SoriotAstraZeneca Reuters. AstraZeneca chief executive Pascal Soriot.

London - AstraZeneca expects earnings to continue to fall in 2014 as generic competition to its popular heartburn and ulcer drug Nexium takes a big bite out of US profits from May.

The British drugmaker said on Thursday that group sales this year were likely to decline by a low-to-mid single digit percentage figure, with earnings per share falling “in the teens”, due to the loss of such profitable medicines.

Shares in AstraZeneca fell 1 percent in early trading.

“In the near term these headwinds will remain challenging, however I am confident that we can return to growth faster than anticipated,” said chief executive Pascal Soriot.

He reiterated a recent forecast that 2017 revenue would be broadly in line with 2013 and said a restructuring programme had now been expanded to deliver a total $1.1 billion of annual benefits.

Despite the tough backdrop, AstraZeneca has decided to keep investing in priority areas such as diabetes, where its presence has been bolstered by a recent $4 billion deal to take full control of an alliance with Bristol-Myers Squibb.

AstraZeneca is also throwing resources behind its new heart drug Brilinta, which has got off to a slow start but is seen as a long-term winner. The drug sold $92 million in the fourth quarter.

Brilinta's prospects have become less certain, however, since it was revealed in October that US authorities were looking into a major clinical trial that was used to win marketing approval.

A company spokeswoman said the media attention surrounding the case had “put in place some headwinds” for Brilinta but the company was confident in the integrity of the study.

Sales in the fourth quarter of 2013 fell 6 percent to $6.84 billion, generating “core” earnings, which exclude certain items, down 28 percent at $1.23 a share.

Industry analysts had, on average, forecast sales in the quarter of $6.88 billion and earnings of $1.16 a share, according to Thomson Reuters.

Soriot, who has been in the job for just over a year, has previously warned that turning around AstraZeneca will take several years as he rebuilds a pipeline of new medicines to replace those going off patent.

But he put a floor under the group's decline last month by predicting 2017 revenue roughly in line with 2013, while stopping short of giving a medium-term target for earnings.

Britain's second-biggest drugmaker is already suffering from generic competition to its antipsychotic Seroquel, while top-selling Crestor, for high cholesterol, faces US competition from cheap copycat drugs in 2016.

The patent expiries are putting downward pressure on AstraZeneca's sales at a time when many of its rivals have put their biggest patent losses behind them.

Soriot has been striking a number of bolt-on deals to refill the company's thin pipeline of new medicines and accelerating in-house research programmes.

The group now has 11 new-drug programmes in late-stage Phase III testing, almost double the number a year ago, and 19 candidates that could start late-stage Phase III trials in 2014 or 2015.

Hopes are particularly high for its cancer research, where it has started trials for immunotherapy combination treatments for which the first results are anticipated in 2014/15.

AstraZeneca is behind the likes of Bristol-Myers, Roche and Merck & Co in the race to develop immunotherapies - a hot new area of cancer research - but it is betting on combination treatments to help it to catch up. - Reuters


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