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AstraZeneca on Thursday upgraded its annual guidance after reporting third-quarter sales that topped estimates following a delay to generic competition for Nexium in the US. The company said that revenue this year will increase by a low single-digit percentage at constant exchange rates, lifted from a prior estimate of in line with 2013. In addition, earnings are expected to decline by about 10 percent, which is less than the low double-digit decline previously guided.
In the three-month period, sales of Nexium, which AstraZeneca had expected to face generic competition from October 1, rose 1 percent on a constant exchange rate basis to $922 million. Ranbaxy, which had been expected to launch a generic version of Nexium in the US with 180 days of marketing exclusivity, disclosed Thursday that the FDA withdrew tentative approval for the product citing the "compliance status" of manufacturing facilities.
AstraZeneca noted that overall sales in the three-month period climbed 5 percent year-over-year to $6.5 billion, above analyst estimates of $6.4 billion, boosted by the performance of Brilinta, as well the company's diabetes and respiratory products, and strong growth in emerging markets. CEO Pascal Soriot remarked "I'm pleased to report our third consecutive quarter of revenue growth," adding that "Brilinta, respiratory and diabetes...increased sales by 38 percent in the quarter."
Quarterly revenue from the respiratory medicine Symbicort rose 15 percent on a constant exchange rate basis to $967 million, while sales of diabetes drugs Onglyza and Bydureon jumped 139 percent and 191 percent, respectively, to $220 million and $125 million. Meanwhile, revenue from Brilinta climbed 68 percent on a constant exchange rate basis to $127 million. For other products, sales of Crestor, which loses US patent protection in 2016, declined 1 percent to $1.3 billion.
According to AstraZeneca, three-monthly sales in the US lifted 7 percent year-over-year to $2.5 billion as declining revenue from Crestor and Nexium, along with the timing of seasonal shipments of Flumist, were more than offset by the inclusion of 100 percent of revenue from the company's previous diabetes joint venture with Bristol-Myers Squibb. Sales in Europe rose 1 percent to $1.6 billion, with revenue in Japan down 7 percent to $568 million, mainly as a result of "generic pressure on oncology products." Meanwhile, sales in emerging markets jumped 11 percent to $1.5 billion, with China, where revenue surged 19 percent to $558 million, a "major driver."
Net income in the quarter reached $254 million, down from $1.2 billion in the prior-year period, partly as a result of increased R&D costs, which reached $1.6 billion, versus $858 million in the same quarter of 2013. "We have chosen to invest in our rapidly developing pipeline that will continue to create value for AstraZeneca in 2015 and beyond," commented Soriot. The CEO added that the "enhanced execution of our strategy and our sustained performance gives us confidence to increase our revenue and...earnings guidance for the year." For 2015, AstraZeneca also indicated that earnings are predicted to be no less than the low end of this year's forecast.
Deutsche Bank analyst Mark Clark said market forecasts for earnings were likely to be revised down by a few percent for 2014 and up a small amount for 2015, though this was "of limited relevance to the long term pipeline-led return to growth story." Berenberg Bank analyst Alistair Campbell added that "cost control will likely be a major focus in 2015 as the company tries to mitigate the damage of finally losing Nexium in the US."
AstraZeneca also said Thursday that it agreed to divest Myalept (metreleptin), an orphan product for the treatment of complications of leptin deficiency in patients with generalised lipodystrophy, to Aegerion Pharmaceuticals. The deal includes an upfront payment to AstraZeneca of $325 million, subject to an existing distributor license with Shionogi covering Japan, South Korea and Taiwan. The transaction is expected to complete in January 2015. Myalept, which is approved in the US for the treatment of generalised lipodystrophy, was gained via AstraZeneca's buyout of the diabetes joint venture with Bristol-Myers Squibb.
According to AstraZeneca, the sale of Myalept will allow it to redeploy resources to its core areas, including cancer drugs and the promising field of immuno-oncology. The company is expected to provide more details on its pipeline at an investor day on November 18. Soriot indicated that the drugmaker is still looking at options for its non-core anti-infectives business, with a decision expected in the coming months. The executive added that he will continue to look at acquisitions, but cautioned "we don’t need to do as many of those as we've done in the past, and our attention will turn more to earlier-stage deals."
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