Comment: Astra's stars will wane

29th Oct 2009 15:29

AstraZeneca impressed the market with better-than-expected third quarter sales and lifted its earnings estimates for the full year, but beyond that the Anglo-Swedish drugmaker could be set for a severe comedown.Sales over the quarter climbed by 5% from the same period a year ago to $8.2bn, lifting pre-tax profits by 28% to $3.4bn or $1.68 a share. Astra was boosted by sales of swine flu vaccines and delays in the emergence of competition to drugs that have lost their exclusive status.Astra has now upgraded core earnings per share estimates for the full year of $6.20-6.40 from $5.70-6.00 previously.A big boost was slowness by competitors in bringing rival drugs to the heart treatment Toprol XL and the cancer treatment Casodex to the market.Sales of Toprol more than doubled to $414m and sales of Casodex fell by a less than expected 43% to $174m. But competitors have emerged for both drugs in the US market so there may be trouble ahead.Astra's top-selling drug, the heartburn treatment Nexium that saw sales fall to $1.243m from $1.315m, also faces generic competition in major European markets from March next year. A competitor has already moved into Nexium's patch in Denmark and authorisation for generic forms has been given in Ireland, Portugal, Austria, Hungary, Estonia, Latvia, Lithuania, Finland and Slovenia. Admittedly, Astra has a pipeline of new drugs including the diabetes drug Onglyza, which has been approved in the US and EU and the heart pill Brilinta, which is awaiting approval in the EU and will be submitted for US approval soon.But about a third of the company's drugs by sales are expected to face competition by 2013, so Astra has its work cut out if it is to maintain the impressive sales growth set out in today's announcement. Astra is trading at about 7.7 times forecast earnings, which looks cheap alongside rival GlaxoSmithKline's P/E ratio of about 10.5x, but Glaxo, which also has a strong pipeline, does not have the same generic competition worries.