AstraZeneca Plc nudged up its forecast for 2008 earnings on Thursday, but sales of ulcer pill Nexium and other key drugs in the first quarter were weaker than hoped for, knocking its shares. "The sales trends of most of the leading products were below what most people expected," said Nomura Code analyst Paul Diggle.
Total first-quarter sales rose 10 percent, short of the 12 percent or more that analysts had expected. The stock fell 4 percent to 20.46 pounds in a weak London stock market by 1135 GMT.
Schizophrenia drug Seroquel and cholesterol fighter Crestor showed double-digit percentage growth, but Nexium sales fell worldwide and tumbled 15 percent in the key US market, due to growing competition from cheaper rival products. For the full year, global Nexium sales are expected to show a mid-single digit percentage sales decline.
The Anglo-Swedish group last week escaped the immediate threat of generic competition to Nexium, the world's second-biggest medicine, but it hasn't been able to dodge growing pressure on prices.
Chief Financial Officer Simon Lowth said the company faced an "increasingly challenging environment". S&P equity analyst Sho Matsubara downgraded the shares to "hold" from "buy" to reflect the slowing momentum in the business. An increase of 19 percent in quarterly "core" earnings per share (EPS) was helped by a weak dollar, leading the group to increase its forecast for 2008 core EPS to between $4.45 and $4.75, against $4.40-4.70 anticipated previously.
But analysts said the improved outlook would not make a fundamental difference, since it was due to currecny effects. Reported operating profit in the quarter rose 4 percent to $2.26 billion on sales of $7.68 billion, equivalent to core EPS of $1.28. Analysts' median forecasts were for sales of $7.83 billion and core earnings of $1.22 in a Reuters poll.
"Core" earnings exclude restructuring costs and charges related to last year's acquisition of MedImmune. Global drugmakers have reported mixed results, reflecting rising generic competition, pricing pressure and product setbacks. AstraZeneca itself has had a torrid time in the past two years following the failure of key experimental medicines in late-stage development and the poorly received acquisition of MedImmune last year.
But its fortunes have recently improved, with a settlement of a US patent dispute over Nexium with Ranbaxy Laboratories Ltd last week and recent surprisingly good clinical trial results for Crestor. The Ranbaxy deal removes the imminent threat of generics, though ongoing litigation with other companies means cheap copies of Nexium might still enter the US market before the 2014 date agreed with the Indian group.
AstraZeneca also faces a continuing legal fight over its patents on Seroquel. Its shares have fallen nearly 40 percent since October 2006 but have rallied 19 percent since hitting a 10-year low in mid-March. The stock trades on around 9.2 times forecast 2009 earnings, a discount to British rival GlaxoSmithKline Plc on 10.8 times, according to Reuters data.
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