AstraZeneca earns up but investors cautious

LONDON - Pharmaceutical company AstraZeneca PLC lifted its full-year earnings forecast on Thursday, banking on continued gains from its swine flu vaccine, after posting a 22 percent hike in third quarter profits.

But investors were not swayed by the positive topline result, which was fueled by a number of one-off factors, and the London-based company's share price dropped amid concern about its ability to contend with growing generic competition to its drugs.

AstraZeneca posted net profit of $2.12 billion for three months to the end of September, up from $1.74 billion in the same period a year ago.

Revenue rose 5.5 percent to $8.2 billion, supported by the delayed entry of generic drug competition in the United States and strong demand for its cholesterol drug Crestor, as well as sales of the H1N1 vaccine.

The company lifted its full year earnings per share forecast to a range of $6.20 to $6.40, from $5.70 to $6 previously.

Chief Financial Officer Simon Lowth acknowledged the results were "boosted by some unanticipated revenue upside," but said that AstraZeneca's progress was solid, pointing to consistent growth in emerging markets, where revenue was up 15 percent over the quarter.

"Overall, the business has performed more strongly on the top line than we had anticipated and we haven't experienced quite the headwind that we had anticipated at the beginning of the year," Lowth said.

However, concerns remain about the company's future pipeline of drugs, with investors spooked on Wednesday when AstraZeneca pulled its lung cancer drug Zactima from regulatory clearance lists in the United States and European Union following disappointing trial results.

The company's shares were down 1.4 percent at 2,749 pence in afternoon trade on Thursday, extending Wednesday's losses, after initially tracking higher following the earnings release.

"While headline core and reported numbers beat expectations throughout the P&L, the detail reveals over half of the 'beat' to have been down to one-off items," said Charles Stanley analyst Jeremy Batstone-Carr.

"Excluding the positive impact of one-off items, the overall performance was much less spectacular, and we maintain our doubts regarding the company's ability to grow the top line in the face of steadily increasing generic pressures over the next five years," he said.

Sales of AstraZeneca's H1N1 nasal spray vaccine totaled $152 million in the quarter, and Lowth said the company was on track to deliver the 40 million doses ordered by the U.S. government by early next year.

The bulk of sales from the total contract worth $453 million would be recorded by AstraZeneca in the fourth quarter, Lowth said.

Lowth said the company had additional capacity of 200 million doses, but does not have the nasal spray capacity to match that. It continued to hold regulatory discussions about using that capacity in another form — perhaps a dropper — if demand warranted, he said.

The quarterly result was also boosted by delays to the introduction of cheap generic versions of its heart drug Toprol-XL and cancer treatment Casodex. Rivals to both those drugs have since hit the U.S. market.

Toprol XL sales surged 110 percent to $1.15 billion, while sales of Casodex dropped 43 percent to $174 billion. Crestor sales were up 30 percent at $1.15 billion.

AstraZeneca also said it had reached an agreement in principle with the U.S. Attorney's Office in Philadelphia, setting aside $520 million to resolve an investigation into its sales and marketing practices regarding anti-psychotic drug Seroquel.

Among other key drugs, sales of its heartburn drug Nexium were down 1 percent at $1.24 million over the quarter. Its asthma treatment Symbicort booked a 22 percent rise in sales to $562 million.

Onglyza, the diabetes drug AstraZeneca launched with Bristol-Myers Squibb Co., booked AstraZeneca revenue of $9 million in the quarter.

Seroquel sales were up 12 percent at $1.23 billion over the quarter. The Philadelphia inquiry included allegations that it promoted the drug for non-indicated uses. AstraZeneca did not comment on whether it had admitted any liability as part of the deal to resolve the investigation.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.