AstraZeneca Q1 Profit Rises Despite Revenue Drop

From Associated Press (April 28, 2011)


LONDON -- Anglo-Swedish drug maker AstraZeneca PLC posted Thursday a 4.8 percent rise in first-quarter net profit and lifted its full-year forecast after reaching a deal with British and U.S. authorities to pay less tax.

But revenues at Britain's second-largest drug maker remained under pressure amid increasing competition from cheap generic medicines.

Net income rose to $2.92 billion from $2.78 billion a year earlier, despite a 4 percent fall in revenue to $8.29 billion as the company lost more than $550 million in sales to generics.

U.S. sales declined 11 percent while sales in Europe, where governments imposed price restrictions on medicines, dropped 7 percent, leaving emerging markets to provide a bright spot with sales growth of 13 percent.

"Our first quarter revenue performance reflects the anticipated generic competition in the U.S. and Western Europe, which we partially mitigated by our continued double digit growth in emerging markets," said Chief Executive Officer David Brennan.

But the biggest boost to the London-based company was an agreement with U.S. and British tax regulators that added $500 million to the bottom line. It also booked around $131 million from a one-off patent settlement between its Medimmune business and PDL Biopharma.

The tax settlement lifted first quarter earnings per share by 39 cents to $2.23 and led the company to raise its full-year EPS forecast by 5 cents per share to a range of $6.95 to $7.25.

Still, the company is struggling to build up a pipeline of new drugs as many of its current crop, including breast cancer drug Arimidex, asthma medicine Pulmicort and heart drug Toprol XL, face increasing generic competition.

Patents are also soon to expire on its best-selling heartburn pill Nexium and schizophrenia drug Seroquel.

AstraZeneca is banking on new heart drug Brilinta and ongoing strong sales of cholesterol drug Crestor to help offset the sales drop, but Brilinta has not yet been approved by U.S. regulators and Crestor is likely to be hit when the U.S. patent on Pfizer Inc.'s cholesterol drug Lipitor runs out later this year.

Shares in the company were down 2.3 percent 3,027.5 pence ($50.44) in morning trade on the London Stock Exchange.

Panmure Gordon analyst Tom Kemp said he remained positive on the stock despite the obstacles, noting positives including new treatment guidelines for Crestor in the United States and the potential approval of diabetes drug dapagliflozin this year.

"Another beat and another upgrade to the outlook provides plenty of evidence that management strategy to deal with trough year 2012 should work," Kemp said
 

Posted: April 2011


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