AstraZeneca chief quits as earnings fall

City A.M. Reporter
AstraZeneca chief executive David Brennan is to step down on 1 June in an abrupt exit that follows rising investor discontent at the company's performance.

Underlying earnings fell 19 per cent in the first quarter, underscoring the drug company's need to find new sources of growth as key products lose patent protection.

Britain's second-biggest drugmaker has recently stepped up its pace of deal-making, to bring in more promising new drugs from other companies, but Brennan has been under fire from some investors for not acting sooner.

Brennan will be replaced on an interim basis by Chief Financial Officer Simon Lowth while a permanent successor from inside or outside the company is found, AstraZeneca said on Thursday.

At the same time, Leif Johansson will succeed Louis Schweitzer as non-executive chairman on June 1 - three months earlier than planned - and will become chairman of the nomination and governance committee after the annual meeting later on Thursday.

That will put the former Volvo boss in pole position to select a replacement for Brennan.

AstraZeneca faces a slump in sales, following the loss of patent cover on antipsychotic Seroquel last month, while heartburn pill Nexium and its top-selling heart drug Crestor lose U.S. protection in 2014 and 2016, respectively.

It has few new drugs in development to replace these big sellers and its problems mean it trades on only around seven times this year's expected earnings, the lowest multiple for any major international drug company.

Although the main hit from the loss of Seroquel is yet to come, group sales already fell 11 per cent in the first three months, weighed down by a tough year-ago comparison and generic competition for Nexium and other drugs in Europe.

Sales in the quarter were $7.35bn (£4.53bn), generating "core" earnings, which exclude certain items, down 19 percent at $1.81 a share.

Analysts, on average, had forecast sales in the quarter of $7.92bn and earnings of $1.79 per share.

AstraZeneca cut its forecast for full-year core earnings to between $5.85 and $6.15 a share from $6.00-$6.30 previously and against $7.28 in 2011.