WSJ on AZN
(I thought Helen Thomas was dead)
By
Helen Thomas
connect
Updated Feb. 6, 2014 1:30 p.m. ET
AstraZeneca, the laggard of Europe's pharmaceutical sector, is closing in on its rivals. But the U.K. drug maker has some serious running to do.
The clearest progress has come in Astra's pipeline. The company said Thursday that it has 11 molecules in late-stage clinical development, beating its target of 10 by 2016. Moreover, thanks in part to a series of acquisitions last year, there are now some reinforcements behind them: Astra has 19 candidates to start phase three trials this year and next. Early stage prospects in oncology add longer-term potential. Astra will have data this year on its immunotherapy assets, a hot area in which Bristol-Myers Squibb, Merck & Co. and Roche Holding have had most attention.
The trouble is that 2014 looks like a slog. Astra expects revenue to fall by low-to-midsingle-digit percentages this year, from 2013's $25.7 billion. That is despite the fact that taking full control of its diabetes joint venture with Bristol should add close to $1 billion to Astra's top line, according to Deutsche Bank. DBK.XE +1.65%
Nexium, a gastrointestinal drug with sales of $3.9 billion last year, could face generic competition starting in June. And not all of Astra's businesses earmarked for growth are racing. Sales of respiratory drug Symbicort rose 10% last year, but the launch of blood thinner Brilinta has been hampered by a U.S. investigation into its trial data.
Rebuilding a pharmaceutical business also doesn't come cheap. The marketing push behind Astra's efforts to expand in areas like diabetes and emerging markets meant sales, general and administrative costs jumped 14% year over year in the fourth quarter. So far, helped by a substantial restructuring program that Astra expanded Thursday, the company has kept research and development costs in check. Spending was up 1% across the year and 2% in the final quarter. That may become harder as more drugs require large, expensive late-stage trials.
Astra believes it can reach sales in 2017 that are broadly in line with last year's. But earnings per share are still forecast to be a fifth lower, at a time when the rest of the sector should be expanding. Meanwhile, at over 14 times 2015 earnings, Astra's discount to the European sector, about 25% a year ago, has been all but eliminated. The risk this year is that Astra's recovery runs out of steam.
Write to Helen Thomas at helen.thomas@wsj.com
