|AstraZeneca CEO Pascal Soriot|
AstraZeneca ($AZN) CEO Pascal Soriot, while fighting off the takeover attempt by Pfizer ($PFE), promised that the company would hit annual revenue of $45 billion by 2023. Now he will be measured by that promise quarter by quarter and today he fell a little short.
With sales of blockbuster acid reflux drug Nexium off 31% as generics hit the market, revenue for the U.K. company reached only $6.06 billion, down 6% from $6.46 billion, a year earlier. It reported earnings of $1.08 a share after exclusions, down 3% from $1.17 a share, a year ago, it said in its earnings presentation.
Soriot found the results "encouraging," pointing out that revenue from what he calls growth platforms made up 56%. To be fair the results were in line with analyst consensus, so not unexpected. But as Reuters points out, some analysts were skeptical about how it plays towards the long-term goal, given that revenues were helped by the sell-off of some drugs. Results fell short of what Bernstein Analyst Tim Anderson had forecast, who told investors in a note, AstraZeneca's "externalization revenue" and other income of $426 million, "overcame other areas of weakness both on the revenue front and on the spending front."
Soriot is looking to AstraZeneca's cancer drug pipeline to power revenues in the future and he focused today on a couple of deals, one in which it will pick up $450 million from Celgene ($CELG) for helping it develop and market a new anti-PD-L1 immuno-oncology drug for blood cancer. AstraZeneca pointed to Celgene's experience with hematology drugs but the deal means that the company will be giving Celgene about half of the revenues in that category for a potentially top selling drug.
Deutsche Bank analyst Richard Parkers finds these fill-the-gap revenue deals of "questionable sustainability," Reuters pointed out while Anderson said that this kind of earnings "engineering" is the only thing that will allow the company to meet its earnings projections.
AstraZeneca is studying the PD-1 inhibitor in some other areas, like lung cancer, where it could reap the full rewards, and the PD-1 inhibitor market is expected to grow to $33 billion by 2020 by some estimates, so there is plenty of potential upside there for AstraZeneca. Still some competitors, like Bristol-Myers Squibb ($BMY) and its Opdivo are already out in front of AstraZeneca in that arena.
The company has said that its new cancer drugs will be key to hitting that sales goal of $45 billion in 2023 as it shoots to add about $20 billion in sales from the $26 billion it hit last year. But in the meantime, it has yet another patent cliff to overcome, with its blockbuster cholesterol lowering med Crestor losing protection next year.
Special Report: The top 15 pharma companies by 2014 revenue - AstraZeneca