AstraZeneca Q2 sales falls slow, costs begin to increase

1st Aug 2013 07:46

Pharmaceuticals group AstraZeneca saw sales fall in the second quarter as more drugs fell off the 'patent cliff', but the level of declines lessened. First half revenues fell 8.0% at constant exchange rates to $12.6bn, as declines of 4.0% in the three months to end June improved on the 12% slippage in the first quarter.Chief Executive Officer Pascal Soriot said: "We have made real progress in the second quarter against our strategic priorities despite the anticipated impact on revenue of the loss of exclusivity for some brands."Looking forward, the FTSE 100 group warned that with a revenue and cost profile in line with guidance, it continued to expect core earnings per share (EPS) to decline "at a rate that is significantly higher than the decline in revenue in 2013".For the full year AstraZeneca said it continued to anticipate a mid-to-high single-digit decline in revenue.During the quarter, the loss of exclusivity on several key drug brands accounted for roughly $500m in revenue decline, while there was a negative impact of $174m from US healthcare reform.On the upside, Soriot pointed to the group's five key growth platforms - emerging markets, Japan, its Brilinta stroke and heart attack inhibitor, the diabetes and respiratory franchises - combined to deliver a double-digit increase in revenue contribution.He added that AstraZeneca had made continued investments in "distinctive science", numerous pipeline projects, products and key markets, with a new UK strategic centre at the Cambridge Biomedical Campus. Core research and development costs were up 1.0% in the second quarter to $1.04bn, with core operating profits falling 10% to $2.1bn and core EPS down 21% to $1.20 due to a higher tax rate.The board has recommended a first interim dividend of $0.90 or 52p.Although the company decided to shelve its fostamatinib programme for the treatment of rheumatoid arthritis, Soriot said the late-stage pipeline in core therapy areas was growing and had been further strengthened with the acquisitions of Omthera Pharmaceuticals and Pearl Therapeutics and the recently announced collaboration with FibroGen. Analysts at broker Jefferies said revenues and EPS were basically in line with consensus expectations but that core EPS should decline significantly more than revenue in the coming half year."Revenue guidance has been maintained at a mid to high single digit decline on a constant exchange rate basis, whilst EPS guidance has been effectively cut due to higher than previously guided CORE operating costs - low to mid single digit increase versus slightly higher than 2012."Shares in AstraZeneca were up 1.0% to 3,368.5p at 08:11 on Thursday.OH