UPDATE: AstraZeneca Profit Rises But Challenging Year Expected

(Adds Detail, comment from CEO and analyst.)

 
   By Sten Stovall 
   Of DOW JONES NEWSWIRES 
 

LONDON -(Dow Jones)- AstraZeneca PLC (AZN) Thursday said it faces a challenging 2010 after it posted a smaller-than-forecast 24% jump in fourth-quarter 2009 net profit, boosted by rising sales of cholesterol pill Crestor and its swine flu vaccine but hit by an ongoing cost-cutting program and U.S. revenue declines due to generic drug competition and lower levels of inventory stock building.

AstraZeneca, which faces a drop in sales over coming years as many of its blockbuster drugs become exposed to generic competition, said it expects this year will produce a mid single-digit decline in revenue measured on a constant currency basis.

In response to the ongoing challenges AstraZeneca said it would build on previous restructuring efforts started in 2007 by revamping its R&D operations.

"We're on an evolutionary journey here," Chief Executive Officer David Brennan said on a conference call with reporters

The company, which has net funds of around $500 million, also announced resumption of its share buyback program--which was suspended in 2009--and that up to $1 billion in stock repurchases would be made this year.

That gave the company's stock little respite however, as the shares fell after the results, reflecting investor disappointment at the company's results and outlook. At 1218 GMT, the shares were down 2.5% at 2965 pence.

One analyst said that while AstraZeneca's medium term sales outlook sounded a little more optimistic, it's nonetheless precarious as it implies success in a couple of quite high-risk drug trials.

For example, the company's prospects are clouded by a lawsuit beginning in the U.S. next month challenging the patent protection of top-selling cholesterol drug Crestor.

There is also uncertainty over whether AstraZeneca's experimental heart drug Brilinta will win U.S. regulatory approval towards the end of this year.

In the fourth quarter of 2009, AstraZeneca benefited from a revival in sales of high-blood pressure drug Toprol-XL after generic competitors withdrew from the market--a gain that will not be repeated this year as copycat rivals hit the market.

Still, the net effect was to lift adjusted earnings per share for calendar 2009 to $6.32 from a conservative range of $5.15 to $5.45 originally predicted by the group a year ago but which was later upgraded in stages by the company to between $6.20 and $6.40 per share. The dividend rose 12% to $2.30 for the full year.

Net profit rose to $1.55 billion in the three months to Dec. 31, 2009, from $1.25 billion a year earlier. This was below the average estimate of $1.96 billion from 12 analysts polled by Dow Jones Newswires.

Fourth-quarter sales rose to $8.95 billion from $8.19 billion, beating an average forecast of $8.82 billion predicted by the survey.

Generic competition to asthma medication Pulmicort and breast cancer drug Arimidex will pressure the business in 2010. The launch of generic and OTC Prevacid will present a challenge to top-selling stomach ulcer and acid reflux drug Nexium in the US.

AstraZeneca, the U.K.'s second largest drugmaker by sales after GlaxoSmithKline PLC (GSK), was formed in 1999 with the merger of the Swedish-based Astra AB and the UK-based Zeneca Group PLC and currently has more than 65,000 employees and operations in more than 100 countries, according to its website.

-By Sten Stovall, Dow Jones Newswires; 44 20 7842 9292; Sten.Stovall@dowjones.com

(END) Dow Jones Newswires

January 28, 2010 07:47 ET (12:47 GMT)

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