AstraZeneca warns of higher costs as drug sales slide

By Ben Hirschler

LONDON (Reuters) - British drugmaker AstraZeneca warned on Thursday of higher costs in 2013 as it invests through a slump in sales caused by a wave of patent expiries on key medicines.

Analysts at Jefferies said the prediction that operating costs would now increase by a low-to-mid single digit percentage rate this year amounted to an effective cut in earnings guidance.

New Chief Executive Pascal Soriot is striving to turn around the business after a series of setbacks in research and a wave of patent expiries, but has warned that fixing Britain's second-biggest drugmaker will take several years.

Sales in the second quarter fell by a slightly greater-than-expected 6 percent to $6.23 billion, while earnings tumbled by nearly a quarter due to a higher tax rate.

Soriot has set out a strategy of revamping research, accelerating certain development projects and striking deals, both to acquire smaller biotech companies and license in promising new medicines.

He added the latest asset to the company's pipeline on Wednesday through a tie-up with U.S. biotech firm FibroGen potentially worth more than $815 million for rights to an experimental anaemia drug.

Sales were hit in the latest quarter by a slump in revenue from off-patent antipsychotic drug Seroquel, as well as growing competition to top-selling cholesterol fighter Crestor, which has lost patent protection in some countries and faces pricing pressure in the United States.

Sales of Crestor in Canada, for example, were down 77 percent after loss of exclusivity there in April 2012.

Overall, the revenue impact from products which have recently lost exclusivity amounted to around $500 million.

The group reiterated its expectation for a mid-to-high single digit percentage fall in revenue this year but said operating costs are now seen increasing by a low-to-mid single digit rate, whereas previously it had forecast costs would only be "slightly higher" than 2012.

Earnings are expected to decline significantly more than revenue in 2013, it said.

Pre-tax profit on a "core" basis, which excludes certain items, fell 12 percent to $1.94 billion, generating earnings per share down 23 percent at $1.20 a share, AstraZeneca said.

Analysts had, on average, forecast sales of $6.25 billion and earnings pre share of $1.20, according to Thomson Reuters I/B/E/S.

Demand for Brilinta - a new heart drug for which AstraZeneca has high hopes - picked up modestly to $65 million from $51 million in the first quarter of 2012.

Emerging markets sales were up 12 percent, with nearly half of the improvement coming from a 21 percent increase in China.

(Editing by Kate Holton and Tom Pfeiffer)

Source: http://news.yahoo.com/astrazeneca-drug-sales-fall-patent-expiries-second-quarter-062314338.html

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