Biotech Values

[DewDiligence]

AstraZeneca Gives Tepid Guidance, Cuts Jobs

[AZN closed off 7% today, which is a large one-day move for a Big Pharma.]

http://online.wsj.com/article/SB123315750392024399.html

›JANUARY 29, 2009, 11:03 A.M. ET
By ELENA BERTON

LONDON -- AstraZeneca PLC on Thursday reported a 1.4% decline in fourth-quarter net profit and unveiled plans to cut a further 7,400 jobs world-wide by 2013.

The company's chief executive, David Brennan, also said it doesn't plan a merger or large acquisition going forward [this may not be up to him!], but added that he does see opportunities for partnerships and collaborations that would strengthen the company's pipeline.

Net profit declined to $1.25 billion in the three months to Dec. 31, from $1.27 billion a year earlier. This was below the average estimate of $1.49 billion from 12 analysts polled by Dow Jones Newswires. Sales marginally rose to $8.19 billion from $8.17 billion as a result of the strengthening dollar.

Combined with its other cost-cutting moves announced in 2008, the overall efficiency program should deliver savings of $2.5 billion a year at a cost of $2.9 billion, with a total of 15,000 jobs cut over five years, AstraZeneca said. Staff reductions are expected across AstraZeneca's operations, including research and development.

AstraZeneca, the U.K.'s second-largest drug maker by sales after GlaxoSmithKline PLC, currently has more than 67,000 employees and operations in more than 100 countries, according to its Web site.

"This is all about improving efficiency to enable us to invest and maintain long-term competitiveness," Mr. Brennan told reporters during a conference call, noting that the economic downturn isn't the driver behind the deeper cost cuts.

He also said, "We don't have large acquisitions in our strategy."

Pfizer Inc.'s takeover of smaller rival Wyeth this week has reignited speculation that other major drugmakers may follow its example and consider a large deal to overcome the considerable revenue decline expected to affect most of the big pharmaceutical companies as today's blockbuster drugs go off patent in the next five years.

For 2009, AstraZeneca forecast flat revenues in constant currency terms, while flagging core earnings per share, which exclude restructuring costs and charges related to the 2007 purchase of U.S. biotech company MedImmune, in a $5.15 to $5.45-a-share range.

AstraZeneca shares fell after release of the results, reflecting investor disappointment at the company's fourth-quarter performance and outlook for 2009.

By midafternoon in London, AstraZeneca shares, which have gained around 35% in the last 12 months as investors increasingly sought defensive stocks, were trading down 3.4% pence in a lower overall market.

Brokerage Charles Stanley cut its rating on the stock to "reduce" from "hold," saying that the earnings-per-share guidance for 2009 was disappointing.

Sales of cholesterol-lowering drug Crestor, AstraZeneca's third-largest product, rose 23% in the fourth quarter to $987 million, thanks to increased prescriptions as a treatment for clogged arteries. Asthma treatment Symbicort also saw its sales grow strongly, up 18% to $514 million in the quarter.

Turning to its pipeline, AstraZeneca announced plans to apply for regulatory approval of four experimental drugs in 2009. These are: lung cancer drug Zactima; painkiller PN400, which is developed with Pozen Inc.; blood thinner Brilinta, previously known as AZD6140; and a combination pill containing cholesterol drugs Crestor and Abbott Laboratories' TriLipix.

AstraZeneca's key experimental drug, diabetes treatment Onglyza, is under regulatory review in the U.S. and the European Union.

Charles Stanley analyst Jeremy Batstone-Carr said that while AstraZeneca's pipeline is progressing, he sees few key events occurring in 2009. "We do not see sufficient [catalysts] in the pipeline to make good the around 20% lost revenue, as key products move off-patent over the next five years," he said.‹