30th Jul 2015 11:44
LONDON (Alliance News) - AstraZeneca PLC was one of the best performers in the FTSE 100 Thursday after it upgraded its revenue guidance for its full year at constant currency, although it reiterated its earnings per share guidance as it continues to funnel investment into developing its pipeline in an effort to counter looming generic competition to its products.
Shares in AstraZeneca are trading up 2.7% at 4,303.50 pence Thursday afternoon.
The FTSE 100-listed pharmaceutical giant has improved its revenue guidance for its full year at constant currency, now expecting revenue to decline by low single-digit percentage - it had previously guided at the mid single-digit. Its expectations for core earnings per share is unchanged, it continues to expect it to increase by low single-digit percent in the full year.
AstraZeneca defines its core results exclude amortisation, impairment, charges and provisions related to restructuring and other exceptional costs, and at constant currency.
Based on current exchange rates, revenue is expected to decline by high single-digit percent.
AstraZeneca posted a pretax profit of USD1.34 billion for the half year to end-June, down from USD1.50 billion a year before, as revenue fell to USD12.36 billion from USD13.22 billion, and research and development expenses grew. Revenue was hit by the stronger dollar, and at constant currency revenue rose 1%.
Core earnings per share in the first half was stable at USD2.29 during the half year, helped by a one-off tax benefit in the second quarter.
Product sales fell 2% in the first half, hit by generic competition to its acid reflux product Nexium from February.
Externalisation revenue - meaning revenue generated from development, commercialisation, partnerships and out-licences - for the half year was USD780 million, up from USD352 million a year before, as it completed an agreement with US biotechnology company Celgene Corp, and got revenue from agreements with Daiichi Sankyo Co Ltd, the Japanese pharmaceutical company.
On a call with journalists, Chief Executive Officer Pascal Soriot said he could not say whether or not there would be more or less externalisation revenue recognised in the second half of the year.
Like many of its peers, AstraZeneca is facing a 'patent cliff', meaning that patents on some products are expiring, allowing generic competition to enter the market and subsequently hitting sales. As a result, AstraZeneca is increasing investment in progressing its pipeline of products and supporting what it calls its "growth platforms", newer drugs that it hopes will grow and offset the decline of its legacy products.
Generic competition hit sales of AstraZeneca's biggest seller, cholesterol medication Crestor, which fell 5% in the first half.
Research and development costs rose 24% in the first half as the company focused on accelerating investment in its pipeline. AstraZeneca noted that it expects a lower growth rate in its second half. Selling general and administrative costs were also up 4%, as the company continued investing in its product launching programme and growth platforms.
Despite the heavy investment, AstraZeneca said it is committed to reducing its core selling general and administrative costs in 2015 compared to 2014.
It recorded restructuring costs of USD448 million in its first half as part of its ongoing restructuring plans. It said it remains on track to incur USD3.2 billion in one-time restructuring costs, to deliver annualised savings of USD1.1 billion by the end of 2016.
The company has proposed an unchanged interim dividend of USD0.90.
The company said that its robust top-line performance underpins its accelerated investment in research and development as it looks to progress its pipeline. Over 2015 and 2016 the company expects between twelve and sixteen phase II clinical trials to start, fourteen to sixteen new molecular entity and major line-extension regulatory submissions, and between eight and ten NME and major line-extension approvals.
"We made good progress in the period, delivering a robust underlying business performance. This represents six successive quarters of top-line growth. The initiatives introduced to increase efficiency are starting to reduce SG&A costs, supporting our continued strategic investment in science and the acceleration of our pipeline which has positive momentum across all key areas," Soriot said in a statement.
"The strong performance of the growth platforms and the subsequent upgrade to top-line guidance, together with increased R&D productivity reaffirm the confidence we have in our ability to navigate the final impacts from the loss of exclusivity and meet our revenue targets," Soriot added.
AstraZeneca's results came in ahead of consensus forecasts in terms of product sales and core earnings per share, Berenberg noted, as the diabetes portfolio performed ahead of expectations. In particular, Type-2 diabetes drug Forxiga came in 40% ahead of consensus expectations, Liberum noted.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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