4th UPDATE: AstraZeneca 2Q Down On Higher Costs; Lifts Outlook
10:37 AM EDT July 26, 2007
(This updates an article published at 1310 GMT with additional details, analyst comment, share price activity.)
By Elena Berton
Of DOW JONES NEWSWIRES
LONDON -(Dow Jones)- AstraZeneca PLC (AZN) Thursday reported declining second-quarter profits as restructuring costs and higher development expenses offset strong sales from its key products - heartburn treatment Nexium, antipsychotic Seroquel and cholesterol-lowering drug Crestor.
The world's sixth-largest drugmaker also improved its earnings per share forecast for the full year, and stepped up its cost saving program with further job cuts that are expected to reduce its workforce by around 7,600 at a cost of $1.6 billion.
London, England-based AstraZeneca said it now expects a narrower EPS range of $3.90-$4.05, compared with a previous forecast of $3.80-$4.05.
It also said two experimental drugs, dapagliflozin for diabetes and ZD4054 for prostate cancer, will move to late-stage clinical trial, bringing to eight the total number of its phase III compounds, AstraZeneca said.
Pretax profit in the quarter declined 10% to $1.99 billion, while net profit fell to $1.43 billion from $1.60 billion, on sales that rose 10% to $ $7.27 billion thanks to strong contributions from best-selling products such as Nexium, Crestor and Seroquel.
The combined sales of Nexium, Crestor, Seroquel, along with breast cancer treatment Arimidex and asthma treatment Symbicort grew 12% in the quarter to $3.797 billion.
U.S. sales of Nexium, the Anglo-Swedish company's top-selling product, slid 1% on increasing generic competition, but rose 2% in other markets.
Asthma treatment Symbicort, which AstraZeneca launched in the key U.S. market in June to compete against GlaxoSmithKline PLC's (GSK) rival product Advair, posted sales of $414 million, rising 25% from the same quarter in 2006.
Analysts at Societe Generale, who have reiterated their hold recommendation on the stock, said that AstraZeneca's declining second-quarter profits may look negative at first sight, but the underlying business appears to be performing well.
David Seemungal, an analyst with Standard & Poor's, said instead the earnings appear mixed, with sales ahead of expectations, but also higher restructuring costs.
"The key positive news in our view is the pipeline update," Seemungal said.
In the last few years, AstraZeneca's pipeline suffered a number of setbacks as a number of promising drugs failed in late-stage clinical trials.
As a result, the company embarked in a series of deals to replenish its depleted pipeline, the latest of which was the $15.2 billion acquisition of U.S. biotech company MedImmune Inc in April.
Chief Executive David Brennan said AstraZeneca is continuing to look for deals to strengthen its late-stage drug pipeline, but declined to comment on speculation that the company is considering buying the rights to an experimental schizophrenia drug, pimavanserin, which is being developed by Acadia Pharmaceuticals Inc. (ACAD) of the U.S.
Brennan also said the search for candidates to replace Chief Financial Officer Jon Symonds, whose resignation was announced last month, is under way. Until an appointment is finalized, Financial Controller Paul Kenyon will act as interim chief financial officer.
Symonds, who is joining Goldman Sachs Group Inc.'s (GS) investment banking division, lost out to Brennan when AstraZeneca appointed a successor to long-serving Chief Executive Tom McKillop in 2005.
Unlike its larger U.K. rival GlaxoSmithKline, which Wednesday leveraged its balance sheet by doubling its share buyback program to GBP12 billion for the next two years, AstraZeneca maintained its own program at $4 billion for 2007.
The company said it will finalize the buyback level for 2008, which is currently expected to be around $1 billion, at the time of its full-year results in January.
AstraZeneca shares were trading down 33 pence, or 1.2%, at 2,643 pence at 1409 GMT in a lower London market.
Company Web site: astrazeneca.com
-By Elena Berton, Dow Jones Newswires; 44 20 7842 9267; elena.berton@dowjones.com |
