October 25, 2012 / 7:03 AM / in 8 years

New CEO has work cut out as AstraZeneca sales fall

LONDON (Reuters) - AstraZeneca’s sales slumped by a bigger-than-expected 19 percent in the third quarter, underscoring the challenges confronting the drugmaker’s new chief executive, Pascal Soriot.

AstraZeneca Chief Executive Pascal Soriot poses for a photograph in this undated handout photograph released in London October 24, 2012. AstraZeneca's new chief executive, Pascal Soriot, has his work cut out to turn around Britain's second-biggest drugmaker, which is struggling with a slump in medicine sales as patents expire. REUTERS/AstraZeneca/Handout

Faced with patent expires on once best-selling medicines and a thin pipeline of new drugs, the former Roche executive, who joined on October 1, needs to re-focus operations and step up the hunt for acquisitions, analysts believe.

Soriot told reporters on Thursday that buying in products would be an important way of rebuilding the pipeline, adding there was also scope for the recently launched heart drug Brilinta to do “far better”.

“One of the critical things we need to do in the mid-term is to bolster our pipeline and that will rely on business development activities, there is no question about it,” he said.

In his first day in office, Soriot suspended the group’s share buyback program, giving him increased financial flexibility as the group undergoes a strategy review that Soriot confirmed would be presented to investors at the end of January.

Soriot said innovation would remain core to operations and his priority was to “restore the company to growth and scientific leadership” at a time when some rivals are embracing increased diversification.

In the search for promising new drugs, bankers believe AstraZeneca may look at potential acquisitions ranging from small and mid-sized biotech firms to specialty pharma companies like Forest Laboratories and Shire.


In addition to generic competition, the strength of the dollar was a drag on results, although this was offset by lower spending and a one-off gain from Pfizer’s purchase of rights to an over-the-counter form of stomach acid drug Nexium.

As a result, “core” earnings, which exclude certain items, were down by only 12 percent at $1.51 a share, which helped lift the shares by 0.9 percent by 0945 GMT.

Industry analysts, on average, had forecast sales in the quarter of $6.75 billion and earnings of $1.44 a share, according to Thomson Reuters I/B/E/S.

Britain’s second-largest drugmaker reiterated its forecast for a fall in full-year core earnings to between $6.00 and $6.30 a share, against $7.28 in 2011.

AstraZeneca is a pure pharmaceuticals group, without the cushion of alternative revenue streams found at more diversified rivals, increasing its need to find new prescription drugs - something its labs have struggled to do in recent years.

One of its few new drug launches recently has been Brilinta. But this product sold just $24 million in the third quarter and Bernstein analyst Tim Anderson said it was “one of the more disappointing new drug launches in the drug industry”.

Soriot, who at one time helped market Sanofi’s hugely successful rival product Plavix, agreed AstraZeneca had failed to make the most of Brilinta, despite it being the best drug of its kind on the market.

“We can do far better than we have done,” he said. “We may not have shown our best game as we launched Brilinta but I still think there is time to correct course.”


Loss of exclusivity on antipsychotic medicine Seroquel has been a major blow to sales and profits this year and AstraZeneca also faces more big patent losses in future, with Nexium and cholesterol fighter Crestor losing U.S. protection in 2014 and 2016 respectively.

It is not alone in struggling with a “patent cliff” in Western markets. Eli Lilly, Bristol-Myers Squibb and Novartis also missed quarterly sales forecasts.

In addition to patent expiries, big drugmakers have also been hit by falling drug prices in Europe, where the euro crisis has prompted governments to take exceptional measures to curb spiraling healthcare costs.

To offset this, AstraZeneca and its rivals are focused increasingly on emerging markets. The company’s sales in these developing markets grew by 6 percent in constant currency terms in the quarter, with 23 percent growth in China and in Russia.

But a weak performance in Mexico hit overall emerging markets growth by more than 2 percentage points, highlighting the volatility of drug demand in some countries.

Editing by Chris Wickham and Hans-Juergen Peters

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