AstraZeneca gave a cautious outlook for the year ahead on Thursday after meeting analyst forecasts with a 3 percent fall in 2007 earnings, and said market conditions remained challenging.
The Anglo-Swedish drugmaker forecast only modest 2008 growth, with sales and underlying earnings improving at a low-to mid-single-digit percentage rate.
"Given that they are hard at work trying to take costs out, I think people might have expected a little more from the guidance," said Paul Diggle, a pharmaceuticals analyst at Nomura Code Securities.
AstraZeneca shares ended down 1.3 percent on the London market. The stock has underperformed the European drugs sector by 25 percent in the past 15 months, as industry-wide problems of generic competition and a lack of new products have been compounded by a series of late-stage failures.
Citi analyst Kevin Wilson said there were some positive signs on the drug pipeline, with AstraZeneca now expecting on average to bring two new medicines to market a year from 2010 onwards, rather than by 2013 as predicted previously.
Pretax profit for 2007 was $7.98 billion on sales up 12 percent at $29.56 billion, equivalent to earnings per share of $3.74, in line with the median industry analyst forecast according to Reuters Estimates.
Earnings were hit by one-off costs and growing competition to key medicines, the company said on Thursday.
For the year ahead, AstraZeneca forecast "core" EPS would grow to between $4.40 and $4.70, up from $4.38 in 2007. Core earnings exclude restructuring costs and charges related to last year's acquisition of U.S. biotech firm MedImmune.
The group announced plans to cut 10 percent of its workforce last year in a bid to improve profitability, and new Chief Financial Officer Simon Lowth, who joined in November from utilities group Scottish Power, said he was eyeing further savings.
Because it reports in dollars, AstraZeneca's sales have been boosted by the weakness of the U.S. currency, but its top-seller Nexium, for treating excess stomach acid, is having a tough time in the face of pricing pressure from cheaper rivals.
Nexium sales in the all-important U.S. market fell 4 percent and Chief Executive David Brennan said the medicine would face further pressure following the launch of two generic versions of Wyeth's rival ulcer drug Protonix.
"Obviously, the introduction of another generic into the market has the potential to impact both the volume opportunities for the branded products as well as the prices," he told reporters.
Growth in demand for cholesterol fighter Crestor has also slowed, although Brennan said a recent new label claim for atherosclerosis could trigger an uptick in sales.
The coming year poses fresh challenges. Top of the list is the risk that generic drugmakers may decide to launch cut-price versions of Nexium and schizophrenia drug Seroquel in the U.S. market, even though the legal cases over patents have yet to go to court.
Most analysts view such "at-risk" launches as a long shot, but they would be crippling for profits if they happen. Brennan said he believed the intellectual property surrounding both medicines was good.
AstraZeneca is the third large European drugmaker to report 2007 results and its figures add to the mixed picture emerging for the sector. Novartis disappointed investors on Jan. 17 but Swiss rival Roche Holding AG beat forecasts on Jan. 30.