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.

Faced with patent expiries 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.

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 is set to be presented to investors in the first quarter of 2013.

Soriot signaled on Thursday he did not see any dramatic shift away from the current focus on pharmaceutical innovation, rather than diversification, saying his priority was to "restore the company to growth and scientific leadership".

That still leaves scope for increased deal-making, however, and bankers have speculated on 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 against most major currencies was a drag on results, although this was offset by better-than-expected margins and lower spending.

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 1 percent by 4.14 a.m. EDT.

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.

PURE PHARMACEUTICALS

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 the heart medicine 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".

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 heartburn pill Nexium and cholesterol fighter Crestor losing U.S. protection in 2014 and 2016 respectively.

It is not alone in struggling with sales losses 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)

Source: http://news.yahoo.com/ceo-cut-astrazeneca-sales-fall-065858115--finance.html

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