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AstraZeneca plc’s Profit Slashed By Half

astrazeneca

The shares of AstraZeneca (LSE: AZN) (NYSE: AZN.US) dropped 3% to 3758p this morning after the pharmaceutical company announced 2014 earnings will decline, hit by generic competition to its most popular drugs, which cut into US profits.

AstraZeneca, Britain’s second largest healthcare group, reported a revenue fall of 6% to around $7 million after it lost exclusive rights to products including Atacand, Seroquel IR and Merrem. The expiration of patents led to regulators allowing cheaper, generic products onto the market to challenge these bestselling medicines.

AstraZeneca is pursuing purchases and licensing deals as further drugs, such as the cholesterol lowering drug Crestor — which generated $5.6 billion last year — are set to go off-patent. The group announced that it has 11 new medicines in phase III trials entities, which is double the number of a year ago, while Bristol-Myers Squibb was purchased for $4 billion in an effort to corner the diabetes treatment market. Sales have now fallen for three consecutive years.

The FTSE 100 company added that it made a pre-tax loss of $715 million from a profit of nearly $2 billion in the same period in 2012.

The chief executive, Pascal Soriot, commented:

“I’m pleased with the momentum we have built in 2013 against our strategic priorities, in particular our objective of achieving scientific leadership. We continue to focus our organisation on the areas that will drive growth, redeploying our resources to fund the promising late-stage pipeline, which nearly doubled in size over the last 12 months. The acquisition of Bristol-Myers Squibb’s share of our diabetes alliance strengthens our position in this important area and I am delighted that the business integration is progressing with such pace. We extend a warm welcome to our new colleagues who will help us maximise the potential of our diabetes portfolio.”

Before today analysts were expecting AstraZeneca’s upcoming annual results to show earnings equivalent to 291p per share, and a dividend of around 175p per share.

After this morning’s price movement the shares trade at 21 times earnings, and offer a possible income of around 4.5%. 

The decision to ‘buy’ — based on those ratings, today’s results and the wider prospects for the pharmaceuticals sector — is solely your decision.

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> Mark does not own shares in AstraZeneca.