Analysts skeptical as AstraZeneca sales, earnings sink

AstraZeneca's ($AZN) first-quarter sales dropped 12%. Core earnings fell 21%. Neither number approached Bristol-Myers Squibb's ($BMY) scary declines. Both companies are suffering big-time hits to their top drugs because of generic competition. AstraZeneca's earnings actually beat expectations. So why are AstraZeneca analysts less positive about the company's results? It's all about the future.

Significant new products are a long way off for the U.K. company. Its blockbuster cholesterol drug Crestor is already suffering on generics in Canada, and under a recent patent settlement, it will face copycat rivals by May 2016. Nexium falls off patent next year. Jump-starting sales of its bloodthinner Brilinta--one of CEO Pascal Soriot's new goals--isn't an overnight proposition, even though the drug made some gains this quarter. Morgan Stanley analyst Peter Verdult, for one, is skeptical that Brilinta has the traction to capture market share.

And so far, Soriot's dealmaking has steered clear of companies with late-stage products--meaning that a sales payoff won't come for several years. "While some investors have been excited by [AstraZeneca's] mid-stage pipeline update, we highlight that even if data is positive, launches before FY17 are unlikely," Sachin Jain, a Bank of America Merrill Lynch analyst, said in an investor note. Merrill Lynch predicts the company will fall short of its forecasts this year, Jain said (as quoted by ProactiveInvestors).

"While it may be premature to judge the performance of Astra's growth platforms at this early juncture, some investors may be disappointed," Berenberg analyst Alistair Campbell told Reuters.

To be fair, this quarter was never expected to be a strong one for AstraZeneca. Generic competition for its once-best-selling Seroquel drug is a big drag on sales. And it's still too early to tell whether Soriot's growth drivers will, in fact, drive growth. One of those drivers, emerging markets, did enjoy a 9% sales boost for the period, to $1.33 billion. Symbicort, part of the respiratory area that Soriot has marked for growth, delivered a 14% increase to $826 million.

And on Brilinta specifically, the company is in the early stages of its promotional push. "We expect to see the (Brilinta) trajectory really start to steepen and accelerate on the back of those investments towards the back-end of this year," CFO Simon Lowth told reporters in a conference call (as quoted by Reuters).

"Brilinta, the diabetes franchise, Emerging Markets, Japan and our Respiratory products have all made good progress and we continued to invest in distinctive science that will advance our knowledge of disease physiology and help to identify new drug targets," Soriot said in a statement. We'll see how all that goes next quarter.

- get the release from AstraZeneca (PDF)
- read the Reuters news
- see the ProactiveInvestors roundup

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