AstraZeneca urged investors to hold their nerve as the drugs company warned of a tough year ahead because a blockbuster medicine for stomach ulcers will face cut-price competition.
AstraZeneca’s shares dropped by 3.4 per cent to £45.29 after news of a 70 per cent slump in full-year profits to £1.25 billion. The stock remains sharply below the £55-a-share level at which a takeover offer from Pfizer was shunned by management last year.
One of AstraZeneca’s most lucrative products, Nexium, a gastrointestinal drug, has reached the end of its patent in the US, allowing a competitor, Teva, to begin selling a generic version. AstraZeneca acknowledged that this would prompt revenue to fall by “mid single- digit” percentage points in 2015, although the company insisted that it still expects earnings to rise.
Pascal Soriot, chief executive, insisted that he would deliver growth in the end and expressed confidence that shareholders would take a “sophisticated” view. “I think if you’re an investor in AstraZeneca today, you’re an investor because you believe in us for the long term and you buy into our future. We believe we have a bright outlook.”
He brushed aside discussion of Pfizer’s failed bid, insisting that a crackdown by the White House on so-called “tax inversion” takeovers would have scuppered it anyway. “In all likelihood, that £55 a share would never have happened,” said Mr Soriot.
AstraZeneca’s sales edged up by 1 per cent to $26.1 billion during 2014 driven, in part, by a doubling in revenue from diabetes treatments after a deal to buy Bristol-Myers Squibb out of a joint venture on tackling the disease. Nexium generated $3.7 billion, down 4 per cent as its US patent expired.
Income from respiratory drugs rose by 10 per cent to $5.1 billion while sales of Brilinta, a blood thinner for heart attack patients, which proved disappointing on its launch four years ago, rose by 70 per cent to $476 million.
Regulators approved six new medicines during the year, lending weight to the company’s argument that its pipeline is producing potential long-term winners. Mr Soriot has set a goal of lifting AstraZeneca’s revenue to $45 billion by 2023.
Industry experts were unimpressed by the figures. Alistair Campbell, at Berenberg, said: “AstraZeneca has delivered a notably weak fourth quarter and a disappointing sales outlook for 2015.”
Tim Anderson of Sanford Bernstein expressed scepticism about Astra- Zeneca’s promise of increasing earnings despite lower sales: “It’s not clear exactly how management intends to close the gap.”
In a separate announcement yesterday, AstraZeneca said it had bought the US rights to a portfolio of potential drugs for respiratory diseases from Actavis, a US company, for $600 million plus royalties on future sales.
Earlier this week, AstraZeneca was granted planning permission to move its headquarters from London to Cambridge where it intends to build a scientific campus employing 2,000 people.