AstraZeneca has posted a very healthy set of financials for the fourth quarter of 2006 but the firm is also planning to shed some 3,000 jobs and is predicting slower growth for the year ahead.
Operating profit climbed 24% to just over $2 billion or $0.93 per share (+22%) while sales were up 11% to $7.15 billion. The cholesterol-lowerer Crestor (rosuvastatin) put in another stellar performance rising 73% to $625 million, while gastrointestinal drug Nexium (esomeprazole) was up 13% to $1.43 billion. Seroquel (quetiapine) for schizophrenia advanced 19% to $912 million, breast cancer drug Arimidex (anastrozole) rose 24% to $412 million, and combination product for asthma - Symbicort (budesonide and formoterol) - came in at $323 million, up 15%.
Blood pressure drug Toprol XL (metoprolol), sold as Seloken in some markets, slipped 16% to $387 million and this slide is going to get much worse, as the effect of US generic competition to the product, kicked off by Novartis' subsidiary Sandoz, takes hold. AstraZeneca has taken the defensive measure of cutting a deal with Par Pharmaceuticals to launch an 'authorised' generic version of the product, but is still likely to see a significant decline in Toprol XL sales in the USA to the extent that they will be excluded from future earnings estimates.
The steady financials helped AstraZeneca shares rise over 2% but this was helped by the announcement of the 3,000 jobs, or about 4.5% of the workforce, over the next three years. The cuts will be part of a $500 million, three-year revamp of the firm’s supply chain and attempt to boost productivity and are likely to be made in distribution and manufacturing.
Analyst response to the results was reasonably positive but Navid Malik at Collins Stewart pointed out that the strong earnings growth was mainly driven by cost-cutting which stemmed from the number of late-stage drug disappointments AstraZeneca suffered last year , which in turn led to reduced R&D spend.
AstraZeneca has been signing a lot of deals lately, the most impressive being with Bristol-Myers Squibb which gives it access to two late-stage diabetes compounds. However the trio of agreements signed this week, with Argenta Discovery (chronic obstructive pulmonary disease) and the USA's Palatin Technologies (obesity), plus the acquisition of UK antiviral specialist Arrow Therapeutics for $150 million are all early-stage projects and Mr Malik noted that this deals “may no doubt help AstraZeneca to drive future growth five years out, the aggressiveness with which it is pursuing its current strategy may raise questions as to the quality of assets it is acquiring.”
Patent expiries loom large for the firm as well but AstraZeneca seems unlikely to try for a big merger to help improve its prospects, as chief executive David Brennan told reporters that "we don't see transformational deals as a fundamental part of our strategy."