) reported first quarter 2012 core adjusted earnings of $1.81 per
American Depositary Share (
), 4 cents below the Zacks Consensus Estimate. Earnings were down
19% (at constant exchange rates [CER]) year over year. Higher tax
rate hurt earnings during the quarter.
AstraZeneca's quarterly revenues fell 11% (at CER) year over
year to $7.3 billion, owing to intense generic competition.
Revenues were much below the Zacks Consensus Estimate of $7.9
All growth rates mentioned below are on a year-on-year basis and
at constant exchange rates.
The Quarter in Detail
US revenues were down 12% in the first quarter of 2012,
primarily due to generic competition for Seroquel IR and US
healthcare reform. US healthcare reform negatively impacted first
quarter revenues by $205 million. Revenues declined 11% in Rest of
the World (RoW). The decline was primarily due to weaknesses in the
Western European (down 19%) and the Established ROW (down 9%)
markets. Revenues in the Emerging Markets witnessed a mere 1%
growth in the reported quarter. Weak sales in Brazil (down 15%),
Turkey (down 18%) and Mexico (down 25%) pulled down sales in the
emerging markets. The company expects sales to pick up in the
upcoming quarters of 2012.
Generic competition impacted revenues by 8%. The drugs facing
generic competition include Seroquel IR (down 25% to $754 million),
Nexium (down 18% to $953 million), Arimidex (down 39% to $144
million), Seloken/Toprol-XL (down 8% to $224 million), Casodex
(down 17% to $113 million) and Merrem (down 40% to $100
However, drugs such as Iressa (up 17% to $143 million), Seroquel
XR (up 14% to $384 million), Onglyza (up 106% to $72 million) and
Faslodex (up 24% to $151 million) performed well during the
Sales of Crestor increased 2% to $1.5 billion. Brilinta sales
were $9 million in the first quarter 2012 compared with $5 million
in the fourth quarter of 2011.
Among AstraZeneca's six product franchises, revenues from five
categories dwindled while one remained flat. Revenues from
Infection and Other (19%), Gastrointestinal (18%), Neuroscience
(16%), Oncology (7%) and Respiratory (5%) segment plunged.
Cardiovascular segment revenues remained unchanged.
AstraZeneca's core gross margin decreased 190 basis points (bps)
to 82% in the first quarter of 2012. Core gross margin in first
quarter 2011 was boosted due to settlement of patent disputes with
Core selling, general and administrative (SG&A) expenses
went down 9% to $2.1 billion, primarily attributable to lower
advertising costs and restructuring initiatives.
During the quarter, core research and development (R&D)
expenses amounted to $1.1 billion, reflecting an increase of 2%,
due to higher intangible impairment charges relating to
The company made dividend payments of $2.5 billion and net share
repurchases of $912 million in the reported quarter.
Along with the first quarter 2012 results, AstraZeneca announced
that David Brennan, the company's Chief Executive Officer (
) and Board member, has decided to step down. David Brennan will
retire from his responsibilities effective June 1, 2012. Simon
Lowth, currently the Executive Director and Chief Financial Officer
(CFO) at AstraZeneca, will serve as interim CEO until a permanent
successor is found.
The news of retirement along with the weak quarter had a
negative impact on the stock price.
For 2012, AstraZeneca lowered its adjusted earnings guidance
range to $5.85 - $6.15 from $6.00 - $6.30. The Zacks Consensus
Estimate is pegged at $6.30 per share. Revenues are expected to
decline in a low to mid-teens range compared with 2011 levels (at
CER), due to government price intervention, generic competition
coupled with the disposal of the Astra Tech business and the
ongoing disposal of the Aptium unit.
Neutral on AstraZeneca
We are encouraged by the company's focus on the high-potential
emerging markets and are pleased with the company's effort to drive
the bottom line through cost-cutting initiatives and share
buybacks. We are pleased with AstraZeneca's effort to expand its
pipeline through the collaboration with
) for the joint development and commercialization of five
monoclonal antibodies in Amgen's pipeline.
However, we remain concerned about the generic competition faced
by its key products. The weak late-stage pipeline coupled with the
slow Brilinta uptake also bothers us. We currently have a Neutral
recommendation on AstraZeneca. The stock carries a Zacks #3 Rank
(Hold rating) in the short run.
PDL BIOPHARMA (
): Free Stock Analysis Report
To read this article on Zacks.com click here.