) second-quarter 2013 core earnings of $1.20 per American
Depositary Share (ADS) beat the Zacks Consensus Estimate of
$1.17. Earnings were down 21% (at constant exchange rates or CER)
year over year. Earnings in the second quarter of 2012 reflect
benefit from tax settlements.
AstraZeneca's quarterly revenues fell 4% (at CER) year over year
to $6.2 billion, primarily due to intense generic competition.
Revenues were in line with the Zacks Consensus Estimate. The
adverse effect of the genericization of products, which recently
lost patent protection, was approximately $500 million.
All growth rates mentioned below are on a year-on-year basis and
The Quarter in Detail
U.S. revenues were down 4% in the second quarter of 2013 to $2.3
billion, primarily due to generic competition for Seroquel IR.
U.S. healthcare reform negatively impacted second-quarter
revenues and costs by $174 million.
Revenues declined 4% in the Rest of the World (RoW) to $4.0
billion. The decline was attributed to weakness in the European
markets, which were down 13% primarily due to the loss of
exclusivity on Seroquel IR, Atacand and Nexium.
Established ROW revenues were down 6%. Results were hurt by a 77%
decline in Crestor sales in Canada as a result of generic
competition and pricing pressure in Australia. Revenues in
Emerging Markets witnessed 12% growth in the reported quarter
fuelled by growth in China (21%).
The drugs facing generic competition include Seroquel IR (down
62% to $99 million), Arimidex (down 39% to $83 million), Casodex
(down 7% to $96 million), Atacand (down 37% to $166 million),
Losec/Prilosec (down 36% to $121 million), Seloken/Toprol-XL
(down 12% to $183 million) and Merrem (down 18% to $81 million).
However, drugs such as Iressa (up 7% to $156 million), Onglyza
(up 28% to $102 million), Symbicort (up 8% to $842 million),
Pulmicort (up 4% to $213 million) and Faslodex (up 13% to $173
million) performed well during the quarter.
Brilinta sales were $65 million in the second quarter of 2013
compared with $51 million in the first quarter of 2013.
AstraZeneca's core gross margin increased 1.1 percentage points
to 82.3% in the second quarter of 2013. Core selling, general and
administrative (SG&A) expenses went up 6% to $2.2 billion
primarily due to investments in Emerging Markets, Brilinta and
the diabetes franchise.
During the quarter, core research and development (R&D)
expenses amounted to $1.0 billion, reflecting an increase of 1%.
Investments in pipeline were partially offset by savings from
restructuring programs. Operating profit, as a percentage of
sales, stood at 33.0%, down 2.3 percentage points.
2013 is a challenging year for AstraZeneca. The company continues
to expect 2013 revenue to decline in the mid-to-high, single
digit and core earnings to decline considerably more than
Generic competition has adversely impacted AstraZeneca's revenues
over the past few quarters. This has put significant pressure on
the company. AstraZeneca is looking towards cost-cutting
initiatives to drive the bottom line in the face of
The company expects to boost its pipeline by acquiring
candidates. As a result, core operating costs are now expected to
increase in the low-to-mid, single-digit range (previous
guidance: slight increase).
ASTRAZENECA PLC (AZN): Free Stock Analysis
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In a bid to add late-stage candidates to its pipeline,
AstraZeneca entered into a number of acquisition deals (Pearl
Therapeutics and Omthera Pharmaceuticals) in the last few months
and agreements with companies such as FibroGen, Inc.
AstraZeneca, a large cap biopharmaceutical company, carries a
Zacks Rank #3 (Hold). However, another large cap pharma stock,
Johnson & Johnson
), currently looks better positioned with a Zacks Rank #2 (Buy).
Other companies in the pharma space that are worth considering
Biogen Idec Inc.
Gilead Sciences Inc.
). Both carry a Zacks Rank #1 (Strong Buy).