24th Apr 2015 10:25
LONDON (Alliance News) - AstraZeneca PLC maintained its full-year guidance as it posted a decline in core earnings per share and operating profit for the first quarter of 2015 due to continued investment into its pipeline of new drugs, and as generic competition to its maturing portfolio and the strong US dollar hit revenue.
However, a step-up in what AstraZeneca defines as "externalisation" revenue, meaning revenue from collaborations, commercialisation, partnerships and out-licensing deals and the sale of some of its products, helped drive up pretax profit in the quarter.
The FTSE-100 pharmaceuticals giant posted a pretax profit of USD678 million in the quarter, up from USD638 million a year before, as a decline in revenue of 6% to USD6.06 billion from USD6.46 billion was offset by lower cost of sales and a boost from product disposals, including rare metabolic disease treatment Myalept for USD193 million and the US rights to beta-blocker Tenormin.
Revenue growth was hit by a decline in product sales due to generic competition which was further compounded by the strength of the dollar. If exchange rates had remained constant, revenue would have risen 1%, it said.
At the core level, excluding amortisation, impairment, restructuring charges and other exceptional items, operating profit was down 4% to USD1.81 billion from USD1.95 billion. This was due to a lower core operating margin, and higher investments and research and development costs, as AstraZeneca continued to invest in developing its late-stage pipeline and sales and marketing.
The company had a lower cost base in the first quarter of 2014, but costs have increased since it bought up Bristol-Myers Squibb's share in their diabetes joint venture.
The company said it is committed to reducing its core selling, general and administrative and investment costs, and has a number of programmes in place to do so over the course of 2015.
Core earnings per share fell 7% at actual exchange rates to USD1.08 from USD1.17 a year before.
In the US, product sales were down 14%, as growth from unstable angina treatment Brilinta, and type 2 diabetes treatments Farxiga and Bydureon was more than offset by the loss of exclusivity for acid reflux drug Nexium and competition from generics for its biggest seller, cholesterol and cardiovascular treatment Crestor. In Europe sales were down 5%, also hampered by generic competition to Crestor and to bipolar disorder treatment Seroquel XR.
This offset strong growth in emerging markets, particularly China, where its respiratory and diabetes portfolios performed well.
Revenue from Crestor fell to USD1.17 billion, from USD1.33 billion a year before, and down from USD1.39 billion in the fourth quarter of 2014. Second biggest seller Symbicort, for the treatment of asthma and chronic obstructive pulmonary disease, fell to USD845 million from USD928 million a year before.
"Our encouraging performance in the quarter supports our full-year guidance," said Chief Executive Officer Pascal Soriot in a statement. The company expects twelve to sixteen phase II trial starts in 2015 and 2016, fourteen to sixteen new molecular entity and major line-extension regulatory submissions, and between eight and ten new molecular entity and major-line extension approvals.
The company continues to expect revenue for the year to decline by a mid single-digit percentage at constant currency, and core earnings per share to increase by a low single-digit percentage at constant currency.
At current exchange rates, AstraZeneca expects revenue to decline at a low double-digit percentage, and core earnings per share to be broadly in line with 2014.
In March, the company signed a deal to co-commercialise its Movantik treatment for opioid-induced constipation with Daiichi Sankyo Inc, netting it an upfront payment of USD200 million, which helped contribute to its externalised revenue in the quarter.
AstraZeneca, more than most peers, has struck a so-called patent cliff, with several of its key drugs facing competition from generics. It has set out to refresh its pipeline by developing new drugs, a move that had been welcomed by analysts and has shown early signs of paying off.
Although the results came in ahead or in line with many analysts' expectations, Berenberg cited the sale of drugs and the Movantik deal as raising concerns about AstraZeneca putting an emphasis on short-term gains over long-term opportunities.
Deutsche Bank said AstraZeneca's earnings beat was "low quality", and raises question marks over the quality of earnings from the base business.
Separately, AstraZeneca announced that it's MedImmune Ltd research and development arm has signed deals with US biotechnology company Celgene Corp and with French biopharmaceutical company Innate Pharma SA. It will work with Celgene to develop and commercialise an anti-PD-L1 inhibitor, MEDI4736, for hematologic malignancies, and with Innate to develop its anti-NKG2A antibody, IPH2201, including in combination with MEDI4736.
Medimmune will also work with Innate Pharma on developing Innate's anti-NKG2A antibody, IPH2201, including in combination with MEDI4736. Currently in Phase II development, IPH2201 is a potential first-in-class humanised IgG4 antibody. NKG2A is a checkpoint receptor that inhibits the anti-cancer functions of Natural Killer and cytotoxic T-cells.
Shares in AstraZeneca are trading down 2.9% at 4,691.00 pence Friday morning, the biggest faller on the FTSE 100.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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