AstraZeneca third quarter beats forecasts

Source: Reuters

Date :31/10/2008 00:10:23

Drugmaker AstraZeneca suspended share buybacks on Thursday to give more scope for acquisitions as third-quarter forecasts beat expectations and earnings forecasts for the full year were increased.

By Ben Hirschler

The shares gained 5 percent to 25.44 pounds by 3:28 p.m. after touching a high of 25.87 pounds.

The results follow solid figures earlier this month from European rivals GlaxoSmithKline , Novartis and Roche as sales of medicines hold up relatively well in a worsening economic environment.

Cholesterol fighter Crestor and asthma drug Symbicort showed strong growth in the quarter, offsetting an expected fall in sales of ulcer and heartburn treatment Nexium, which faces fierce competition from cheaper rivals.

In a move similar to Glaxo last week, AstraZeneca said it would halt share repurchases for the rest of 2008 to take advantage of investment opportunities. Many cash-rich drug firms see the credit crisis as a chance to buy up assets cheaply.

Chief Financial Officer Simon Lowth told reporters the Anglo-Swedish group would actively pursue opportunities to buy promising compounds to bulk up its new drug pipeline via product licensing deals and acquisitions.

For the full year, AstraZeneca now expects core earnings per share of between $4.90 and $5.05, against $4.60-4.90 anticipated previously, helped by dollar and sterling weakness in the third quarter, as well as operational improvements.

CURRENCY SWINGS

Some of those currency advantages may start to unravel in future quarters, following more recent currency swings, but most analyst numbers were already above the previous guidance.

"The fourth quarter is not going to be as strong; they're not going to get as much currency benefits," said WestLB analyst Simon Mather. "So I think this guidance is what they will achieve."

Morgan Stanley analysts said 2008 consensus estimates were likely to rise by 2 to 6 percent and predicted the company would at least meet, or beat, forecasts for the next five quarters.

Reported pretax profit in the quarter rose 29 percent to $2.44 billion (1.49 billion pounds) on sales up 9 percent at $7.78 billion, equivalent to core EPS of $1.32 versus analyst expectations of $1.17.

"Core" earnings exclude restructuring costs and charges.

CRESTOR IN GERMANY

Crestor proved to be a star performer, with sales up a third on a year earlier at $922 million, topping most forecasts.

AstraZeneca said it had recently won approval for the drug in remaining European markets, including Germany and Spain, but it still needs to negotiate pricing before it can launch.

Overall drug sales in emerging markets were up strongly in the three months to September 30 at $1.1 billion -- the second successive quarter in which revenues in have breached $1 billion.

AstraZeneca shares have performed strongly since March, outpacing the European sector by around 30 percent, as the company has successfully seen off the immediate threat of generic competition to Nexium and Seroquel.

Investors are also hopeful that new clinical trial data on Crestor, due to be presented at the annual meeting of the American Heart Association on November9, will help differentiate the medicine in a crowded cholesterol market.

But the shares still trade on a lowly 8.25 times forecast 2009 earnings -- below British rival GlaxoSmithKline on nearly 11 times -- reflecting investor concern about the company's relatively thin late-stage drug pipeline.

(Editing by Jason Neely and Quentin Bryar)

LONDON (Reuters)