AstraZeneca blames earnings nick on cost of biologics plant in Sweden

CG image of AstraZeneca's HQ
AstraZeneca says the expense of building a biologics plant in Sweden was one reason core margins fell last quarter. (AstraZeneca)

Over the long haul, AstraZeneca says the $285 million biologics plant it is building in Sweden will be a big winner as the company concentrates on cell-based drugs to build profits. For now, however, it's a drag.

Executives during an earnings call last week pointed to the cost of the plant as one reason for the 5% drop in core operating profit.

CEO Pascal Soriot told analysts that the drugmaker is starting to use API capacity from the plant in Södertälje, and that will build over time. The company also is about finished with the filling plant.

But for now, CFO Marc Dunoyer said “the lower absorption because we are early in the launch” accounted for about a quarter of the earnings impact.  A drop in Crestor sales because of generic competition also contributed.

AstraZeneca had a disappointing first quarter as revenue fell by 2% overall, and profits dropped, too. AZ shares, however, gained 27% in 2017, fueled by expectations for its immuno-oncology combo and its performance in a key lung cancer trial, Mystic. Those numbers didn’t prove out on a progression-free survival analysis last fall, leaving investors waiting for overall survival data expected later this year. That drug is the type the drugmaker might handle at the new facility.

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When AstraZeneca announced the expansion in 2015, it said the new filling and packaging facility for protein-based drugs was expected to be producing product for clinical trials by 2018—for programs for both AstraZeneca and its MedImmune biotech division—and to be ready for commercial production the next year. When fully operational, it will add 150 to 250 jobs.

The Sweden expansion followed plans by the U.K. drugmaker to spend more than $200 million to expand a biologics facility in Frederick, Maryland.