Nexium reprieve lets AstraZeneca spend, spend, spend to prep for 2015 knockdown

AstraZeneca hiked its 2014 forecast for the second time this year. Sales were up by 5%. Instead of apologizing for a lack of growth, CEO Pascal Soriot could crow about the opposite. Revenue of $6.54 billion beat analyst estimates, and core EPS of $1.05 did the same.

2014 wasn't supposed to be this way. AstraZeneca ($AZN) was able to raise its forecast for a few small reasons--but one very large one. Nexium. Once again, the U.K.-based drugmaker enjoyed a full quarter free of competition from generic rivals for that blockbuster drug. Rather than taking a quick slide toward oblivion, Nexium brought in $2.8 billion so far this year, almost $1 billion of that during the third quarter.

Sure, CEO Pascal Soriot could tout success with his pet project, Brilinta, with sales up 68% for the clot-fighter. Other moves paid off, too, especially the company's buyout of its former partner in the field, Bristol-Myers Squibb ($BMY). Reporting full interest in those products helped pump up results, too. And thanks to some wheeling-and-dealing with U.S. payers, the respiratory blockbuster Symbicort--which helped push rival Advair off a key formulary--turned in 29% growth.

But it's Nexium that has made the difference. Problems at would-be rival Ranbaxy Laboratories, which owns exclusive U.S. rights to sell the generic version for 6 months out of the box, have put off competition--and now, AstraZeneca expects none till 2015.

So, not only is AstraZeneca reaping the sales benefits now, but also has more time to get other products ready to take up the Nexium slack. And Soriot is spending more money to do just that, with some results to show. In a statement, he credited "selective allocation of sales and marketing resources" for the 38% increase in sales from Brilinta, respiratory and diabetes, which he deems "core franchises." That includes a sales push behind Brilinta, plus the launch of its new diabetes-fighter, Farxiga.

And in hopes of keeping new products flowing, the company is socking more money into R&D. "In addition, we have chosen to invest in our rapidly developing pipeline that will continue to create value for AstraZeneca in 2015 and beyond." 

Overall, sales and marketing expenses grew by more than 15% during the quarter, with admin costs down and total SG&A up. The decrease in admin expenses created "headroom" for investment in sales and marketing costs, the company said. Meanwhile, R&D spending grew by 18%, as the company accelerated its late-stage pipeline.

"The results are flattered slightly by the acquisition of BMS's share of the diabetes alliance earlier in the year," Edison Investment Research analyst Mick Cooper said. "That said, the increased investment in sales and marketing appears to be paying off with good growth across its cardiovascular (including Brilinta) and respiratory product portfolios."

That spending may not be sustainable, however. Soriot promised "cost control" in 2015, once the Nexium chickens come home to roost, and its sales become unsustainable, too. In the here and now, though, Soriot was able to once again make his case for a future on its own, without a Pfizer ($PFE) buyout. And later this month, when Pfizer is finally allowed to come back with another bid, we'll find out whether investors agree.

- read the release from AstraZeneca
- see more from Bloomberg

Special Reports: Top 10 pharma companies by 2013 revenue - AstraZeneca | Top 10 drug patent losses of 2014 - Nexium

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