6th Nov 2014 10:37
LONDON (Alliance News) - AstraZeneca PLC Thursday raised its guidance for the full year 2014 for the second time this year, as it saw revenue rise in the nine months to end-September at constant currency, although it expects the strengthening dollar to hit core earnings per share by around 5%.
The pharmaceutical company said its growth drivers offset the hit from generic competition, and its acquisition of Bristol-Myers Squibb Co's share in their diabetes joint venture helped bolster revenue, although this also led to exceptional costs which hit its pretax profit.
The company also announced Thursday that it has agreed to sell its Myalept orphan product for the treatment of leptin deficiency in patients with generalised lipodystrophy to Aegerion Pharmaceuticals Inc for USD325 million upfront. It expects to complete this transaction in January 2015, and does not involve the transfer of any AstraZeneca employees or facilities.
AstraZeneca said that the sale of Myalept "reinforces our focus on core strategic priorities and will allow us to concentrate our resources on disease areas where we can make the biggest difference to patients."
The company now expects revenue to rise in the low single digits at constant currency in 2014, and for core earnings per share to decrease around 10% at constant currency for the full year. At actual exchange rates, core earnings per share is expected to be hit by currency by around 5%. At the time of its interim results the company guided revenue in line with 2013 and core earnings per share to decline in the low double digits, both at constant currency.
AstraZeneca's improved guidance assumes that there is no generic competition for its acid reflux product Nexium product in the US in 2014. The company benefited from the delayed launch of generic competition to this product in the US, leading Nexium sales to beat out consensus expectations.
AstraZeneca posted a pretax profit of USD1.83 billion in the first nine months of 2014, down from USD3.98 billion in the same period a year before, despite seeing revenue rise to USD19.41 billion from USD18.87 billion, due to exceptional costs including USD1.17 billion in restructuring costs, USD1.30 billion in amortisation and impairments, and USD691 million relating to its acquisition of Bristol-Myers Squibb's share in their diabetes joint venture.
The company said that additional final regulations from US tax authority the Internal Revenue Service on the US Branded Prescription Drug fee meant that an additional year's charge had to be recognised in the third quarter.
Revenue was buoyed by a lower hit from the loss of exclusivity being offset by the company's growth drivers. Excluding additional revenue from the diabetes joint venture, revenue in the first nine months was stable at constant currency, AstraZeneca said.
Selling, general and administrative expenses rose 14% due to higher spend dedicated on growth platforms.
In the third quarter US revenues rose 7% as declining sales of AstraZeneca's mature brands such as cholesterol treatment Crestor and Nexium, and the timing of shipments of influenza vaccine Flumist were more than offset by revenue from the diabetes joint venture.
Crestor, AstraZeneca's biggest seller, saw revenue decline to USD1.34 billion in the third quarter from USD1.35 billion a year before. US sales of Crestor fell 5% as prescriptions dropped. However sales in the rest of the World were up 4%, with growth in emerging markets offsetting a hit from generic competition in Australia.
Diabetes products provided USD205 million of incremental revenue in the quarter, and asthma treatment Symbicort and acute coronary syndrome product Brilinta also saw growth.
Revenue in Europe dropped 1%, hit by declines in bipolar disorder treatment Seroquel XR due to adverse patent rulings, and launches of generics hitting schizophrenia treatment Seroquel IR, high blood pressure treatment Atacand and antibiotic Merrem. However, the inclusion of the diabetes joint venture, and continued growth from acute coronary syndrome treatment Brilique, helped to offset this.
The US Department of Justice confirmed that it was closing its investigation into the PLATO clinical trial with Brilinta and is not planning any further action. Brilinta saw revenues of USD125 million in the quarter, up from USD75 million a year before.
On a call with journalists Thursday, Chief Executive Pascal Soriot expressed confidence for Brilinta in 2015, and said recent weeks have seen an acceleration in the product.
The company warned that new guidelines further restricting patients eligible for preventative therapy with Synagis are expected to lead to a "significant impact" on Synagis sales in its fourth quarter, and a further impact in 2015.
The company said that, as it had increased its revenue expectations, it is accelerating its investments in its growth platforms and in expanding its pipeline. For 2015 it plans to selectively invest in its growth platforms and "accelerating" pipeline, whilst managing overall costs. AstraZeneca said its pipeline now includes 121 projects, 107 of which are in the clinical phase of development.
It is targeting core earnings per share for 2015 at "no less" than the lower end of the range of the new guidance for 2014 earnings per share at actual exchange rates. It expects to give its guidance for 2015 with its full year results on February 5.
AstraZeneca's biologics research and development arm MedImmune agreed on Tuesday to buy imaging and data analysis technology company Definiens for an initial payment of USD150 million plus additional milestone payments.
"This enhanced execution of our strategy and our sustained performance gives us confidence to increase our revenue and core earnings guidance for the year. I'm particularly proud of our teams who continue to demonstrate their focus and belief in our strategy, which is rapidly transforming our company," said Soriot in a statement.
Speaking with journalists, Soriot noted the recently collapsed deal between peer Shire PLC and AbbVie Inc following the introduction of measures in the US to cut down on so called 'tax inversion' deals. Soriot said he could not comment on what Pfizer Inc, who AstraZeneca successfully fended off earlier this year, might do as a result of the measures but said that the collapsed deal was a signal that the risk to tax inversion deals is "serious".
Soriot said that he could not speculate whether or not Pfizer might return with another bid, but noted that AstraZeneca's share price has performed well independently, and alluded to what impact this price would have on any offer that could be made.
Berenberg kept its Hold rating on the stock, saying that the results had been broadly in line and helped by better Nexium sales. Berenberg thinks cost control will be "a major focus in 2015 as the company tries to mitigate the damage of finally losing Nexium in the US".
Berenberg also noted the impact of the strengthening dollar against AstraZeneca, which it estimates will lead to core earnings per share coming in below consensus at USD4.30.
Edison Investment Research analyst Mick Cooper said AstraZeneca's results had been "flattered slightly" by diabetes joint venture acquisition. However, Cooper noted that "increased investment in sales and marketing appears to be paying off with good growth across its cardiovascular and respiratory product portfolios."
Shares in AstraZeneca are trading down 2.5% at 4,504.50 pence Thursday morning.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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