April 24 (Bloomberg) -- AstraZeneca Plc, the U.K.'s second- largest drugmaker, reported an unexpected decline in first- quarter profit as sales of ulcer treatment Nexium fell in the U.S. and western Europe.

Net income decreased 3.7 percent to $1.50 billion, the London-based drugmaker said today. Eight analysts surveyed by Bloomberg had estimated earnings would rise to $1.58 billion. Nexium sales were hurt by lower prices and distributors using up excess inventory.

AstraZeneca needs to boost revenue of its best-selling medicines to counter increasing competition from generic rivals and product-development failures. Sales of antipsychotic Seroquel and cholesterol-lowering medicine Crestor were less than analysts expected. The drugmaker is relying on last year's $15.2 billion acquisition of U.S. biotechnology company MedImmune Inc. to help make up lost sales.

``I'm disappointed in the sales figures, especially Crestor,'' analyst Beatrice Muzard of Natixis Securities in Paris, who rates the shares ``reduce,'' said in a telephone interview. ``Our concern is the long-term growth prospects.''

Earnings Per Share

AstraZeneca reported earnings per share of $1.03. Profit fell from $1.56 billion, or $1.02, a year earlier, the drugmaker said. Revenue increased 10 percent to $7.68 billion. Sales in western Europe were down 1 percent as volume rose slightly, AstraZeneca Chief Financial Officer Simon Lowth said in a telephone conference with analysts.

AstraZeneca shares fell 12 pence, or 0.6 percent, to close at 2,120 pence in London. The shares have lost almost a quarter of their value in the past year, making the stock the third-worst performing of the 13 companies in the Bloomberg Europe Pharmaceutical Index.

``It's really dangerous to bet on this one, particularly after the rally we have had,'' Romain Pasche, head of global equity research at Vontobel Asset Management in Zurich who manages about $800 million in drug stocks, said today in an interview on Bloomberg Television before the earnings were released. ``There are still lots of moving parts.''

The U.K. company said core earnings per share will be $4.45 to $4.75 this year, more than previously forecast, because of currency benefits.

Net income included costs of $257 million, or 12 cents a share, for impairment of intangible assets from generic-drugmaker Sun Pharmaceutical Industries Ltd.'s decision to sell a version of MedImmune's cancer drug Ethyol before a patent infringement lawsuit is concluded.

Restructuring Costs

AstraZeneca also reported costs of $117 million for a restructuring program announced last year that is aimed at trimming 11 percent of the workforce by 2010, Lowth said.

The drugmaker didn't report costs from a $215 million fine levied by a court in Alabama over prices it charged the state's Medicaid health insurance program for the poor because the company plans to appeal the ruling, he said.

Sales of Nexium declined 5.4 percent to $1.24 billion from $1.31 billion a year earlier, AstraZeneca said.

``It is true to say that the net prices on Nexium have declined and that has been the main driver,'' Lowth said in a telephone conference with reporters. ``Our volumes for Nexium are broadly unchanged.''

The drugmaker expects a ``mid-single digit decline'' in worldwide Nexium sales for 2008, Lowth said.

Seroquel gained 14 percent to $1.1 billion, below the increase analysts had estimated. Crestor rose 22 percent to $772 million, slightly less than analysts' expectations. Asthma inhaler Symbicort sales were 33 percent higher at $471 million after it was introduced in the U.S. in June and went head-to-head with GlaxoSmithKline Plc's Advair.

GlaxoSmithKline Plc, the U.K.'s largest drugmaker, reported yesterday that first-quarter earnings declined 14 percent to 1.31 billion pounds ($2.59 billion) after safety concerns hurt the sales of its diabetes pill Avandia and older drugs faced increasing competition from generic copies.

To contact the reporter on this story: Andrea Gerlin in London at agerlin@bloomberg.net

Last Updated: April 24, 2008 11:44 EDT