Patent losses looming, AZ fights back with Brilinta, diabetes and China

AstraZeneca ($AZN) is suffering from a new round of patent losses, and that suffering will only worsen. Already hurting from generic competition to its former top-seller, Nexium, the London-based company will fall off another patent cliff this year--Crestor--and faces still another in Seroquel XR next year.

That's not to say that AstraZeneca isn't working to climb back up, or that it hasn't had some success doing so. One of its growth products, Brilinta, racked up a 44% sales increase last year; its diabetes products leapt 76% in emerging markets, boosting the franchise by more than one-quarter overall; and its respiratory portfolio delivered a 7% hike in a tough market, with more gains expected as the company integrates Takeda's respiratory business, a new purchase.

Meanwhile, in the fourth quarter, China sales continued their climb with a 10% hike. And even Nexium, facing head-to-head generics, outgrew analyst estimates for Q4.

Nor does it say that market-watchers weren't expecting the pain. AstraZeneca's fourth-quarter revenue dropped 5% to $6.39 billion after a hit from the strong dollar, but still beat analyst expectations for the period. In constant currencies, revenue managed a small uptick of 2%.

But it does mean AstraZeneca sales will slump in 2016, and earnings along with them. The company says revenue and earnings will both decline by a low- to mid-single-digit percentage, including dilution from two buyouts, Acerta and ZS Pharma.

AstraZeneca CEO Pascal Soriot

CEO Pascal Soriot promises that growth will return next year, despite Seroquel XR's patent expiration. The original formulation of the drug went off patent in early 2012, so the franchise's sales have already shrunk.

"We're confident that our strong execution on strategy, combined with the benefits of focused investments and new launches, keeps us on track to return to sustainable growth in line with our targets," Soriot said in a statement, pointing to an 11% rise in "growth platform" sales and new launches, including the lung cancer drug Tagrisso.

Bernstein analyst Tim Anderson called the quarterly results "decent," while Citi analyst Andrew Baum said the company "continues to deliver" on total revenue and earnings promises (as quoted by the Financial Times). Baum pointed out, however, that "detractors may continue to highlight the underlying quality," referring to new product partnerships that have given one-time boosts to the top line.

Soriot has some even bigger promises to keep in the coming years, with a goal of $45 billion in revenue by 2023. The CEO touted those numbers when fending off Pfizer's hostile bid in 2014.

- check out the AZ release (PDF)
- read the FT article

Special Reports: The top 15 pharma companies by 2014 revenue - AstraZeneca

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