Aug. 1 (Bloomberg) -- AstraZeneca Plc said second-quarter profit fell 12 percent as generic competition to some of its best-selling medicines eroded sales by $500 million.
Profit excluding some items declined to $2.06 billion, or $1.20 a share, from $2.33 billion, or $1.57, a year earlier, the London-based company said in a statement today. That matched the $1.20 average of 15 analyst estimates compiled by Bloomberg.
The U.K.’s second-biggest drugmaker faces a steady decline in sales as it loses patent protection on medicines including the Crestor cholesterol-lowering pill and the antipsychotic treatment Seroquel over the next three years. AstraZeneca is seeking deals to add new products and yesterday said it would pay FibroGen Inc., a closely held U.S. company, as much as $815 million plus royalties for an experimental anemia therapy.
“The impact from brands that have recently lost exclusivity has moderated from levels experienced in recent quarters,” Chief Executive Officer Pascal Soriot said on a conference call with journalists. The FibroGen drug “is a potentially important first-in-class treatment” and adds to the pipeline of products nearing submission for regulatory approval.
AstraZeneca still expects sales to fall by a “mid- to high-single-digit percentage” at constant exchange rates this year. The company said core operating costs will increase by a percentage in the low-to-mid single digits this year.
With the revenue forecast unchanged, the higher costs would effectively lower earnings per share expectations for this year, Jeffrey Holford, a New York-based analyst with Jefferies International Ltd., said in a note to investors today. He rates the shares hold. AstraZeneca had forecast core earnings per share to decline “significantly more than revenue.”
“We’ve seen considerable progress in growing the late-stage portfolio and we’ve brought in late-stage assets,” Chief Financial Officer Simon Lowth said on the call. “We made the decision to step up sales and marketing investment in selected areas where we see good growth into the future.”
AstraZeneca fell less than 0.1 percent to 3,334 pence in London, giving the company a market value of 41.7 billion pounds ($63.2 billion). The stock has gained 19 percent this year including reinvested dividends, compared with a 19 percent return in the Bloomberg Europe Pharmaceutical Index of 19 companies. AstraZeneca’s board recommended an interim dividend of 90 cents a share.
Revenue declined 4 percent to $6.23 billion, beating the $6.22 billion average estimate compiled by Bloomberg. Sales of Crestor, AstraZeneca’s biggest seller last year, fell 4 percent to $1.48 billion. Revenue from Seroquel slipped 31 percent to $438 million while blood pressure drug Atacand’s sales decreased 37 percent to $166 million.
Sales of Brilique, a blood-thinner that won European approval in 2010 and is sold in the U.S. as Brilinta, were $65 million, up from $18 million a year earlier, beating the $58.9 million average estimate compiled by Bloomberg.
“AstraZeneca continues to be hit heavily by its patent cliff, but within the results there are some bright spots,” Mick Cooper, an analyst at Edison Investment Research in London, said in an e-mailed statement. “There are further signs of Brilinta sales gaining momentum and it is growing well ahead of the market in China.”
Revenue in China rose 21 percent in the quarter, contributing to a 12 percent revenue increase in emerging markets, the company said. AstraZeneca has been focusing more on products such as Crestor and the Pulmicort respiratory treatment, rather than branded generics, Soriot said.
“Almost every product is growing there,” he said. The company plans to introduce Brilinta there in the coming months.
AstraZeneca said July 22 that an employee was the focus of a “local police matter” in Shanghai and that there’s “no reason” to believe the individual case is related to any other Chinese investigations, such as the probe of larger U.K. rival GlaxoSmithKline Plc. The employee, a sales representative, is still detained in Shanghai, while two other employees were questioned and released, Soriot said today.
“What we know from police is that it is an individual case,” he said. “We are confident we have right processes in place to be compliant.”
The company continues to cooperate with a 2010 inquiry from the U.S. government regarding practices in markets including China, Lowth said today. AstraZeneca also has been conducting its own internal investigation, and Lowth said there was no update on its progress.
AstraZeneca has been adding new products through partnerships and small to mid-sized acquisitions. The company agreed in June to buy Pearl Therapeutics Inc. for as much as $1.15 billion to expand its respiratory disease portfolio.
Soriot declined to comment on speculation that the company may buy Celltrion Inc., a South Korean maker of biosimilar products. AstraZeneca has a biologics unit, MedImmune, and is exploring ways to leverage that expertise in biosimilars, the executive said.
To contact the editor responsible for this story: Phil Serafino at email@example.com