AstraZeneca hit by high costs as patents expire

DRUG manufacturer AstraZeneca yesterday warned of higher costs in 2013 as it continues to invest despite a slump in sales caused by a wave of patent expiries on key medicines.

The prediction that operating costs will now increase by a low-to-mid single digit percentage rate this year amounts to an effective cut in earnings guidance, analysts at Jefferies said.

New chief executive Pascal Soriot is striving to turn around the business after a series of setbacks in research and a wave of patent expiries.

He has warned that fixing Britain’s second-biggest drugmaker will take several years.

Sales in the second quarter fell by a slightly larger-than-expected six per cent to $6.23bn (£4.11bn), while earnings tumbled by nearly a quarter due to a higher tax rate.

Pre-tax profit on a core basis, which excludes certain items, fell 12 per cent to $1.94bn, generating earnings per share down 23 per cent at $1.20 a share.

There were, however, some bright spots, with lung drug Symbicort doing well in the US and demand picking up for new heart drug Brilinta.

Soriot, who joined AZ in October 2012, said yesterday the ongoing probe into pharmaceutical firms in China could create “some ups and downs because this issue will create turmoil. It may well be that the industry experiences more intense price revisions.”
“But even if this happens, in the mid- to long-term China is a growing market – there is no doubt about that in my mind,” Soriot added.