AstraZeneca ( AZN), fueled by growth for its key drugs, beat analysts' second-quarter estimates and offered an optimistic profit outlook for the full year. For the quarter, AstraZeneca earned $1.02 a share, including a gain of 5 cents from selling certain assets, beating the Wall Street consensus of 93 cents and the year-ago EPS of 75 cents. Second-quarter sales of $6.63 billion were 10% higher than the year-ago period when measured in constant exchange rates. The company predicted that its full-year earnings would be in the "upper half" of its predicted range of $3.60 to $3.90 a share. Still, shares of AstraZeneca lost $2.27, or 3.7%, to $59.73. The stock fell as low as $58. In the last 12 months, however, AstraZeneca's stock is up 41%, a rate that's nearly 10 times better than the gain by the American Stock Exchange index of large pharmaceutical stocks. Although key products had solid growth, AstraZeneca still faces questions about a lingering generic challenge, a new product whose launch will be delayed by 12 months and the progress of experimental drugs. Hanging over its predictions for 2006 and 2007 is the question of whether the blood-pressure drug Toprol XL, one of the company's top sellers, will lose U.S. patent protection. First-half U.S. sales were $732 million, worth 26 cents a share. Other markets contributed $202 million. For the remaining five months, executives predict Toprol XL will contribute 24 cents a share based on U.S. sales, assuming there is no generic competition.
In January , a U.S. District Court judge in Missouri issued a summary judgment in favor of three companies claiming that two Toprol-XL patents were invalid and unenforceable. AstraZeneca has appealed the ruling, arguing that patents should remain in force until mid-September 2007. David Brennan, AstraZeneca's CEO, told analysts during a conference call that he couldn't predict when generic competition might come, or if generic companies might try to sell their products before all legal matters have been settled. He said the Food and Drug Administration hasn't approved any generic copies of Toprol-XL.
The uncertainty is reflected in analysts' evaluations. Tim Anderson of Prudential Equity Group wrote in a research note that he doesn't expect generic competition until January 2007. But Mark Purcell, of Deutsche Bank, predicted generics could reach the U.S. market in September. Another issue affecting future sales is Symbicort, an asthma drug, available in more than 90 countries. It contributed second-quarter sales of $308 million, up 25% from the previous quarter. The FDA
approved the drug last week , but AstraZeneca won't start marketing it until mid-2007. John Patterson, executive director for development, told analysts the company wants to make a revised version of the drug so that it has a longer shelf life. Patterson said the company had made some adjustments in the drug's inhaler, adding that AstraZeneca will need FDA approval for a longer-shelf-life product. He said it's "not uncommon" for drugs administered by inhalers to experience a delay between securing regulatory approval and coming to the market. AstraZeneca's second quarter was bolstered by solid growth from several signature products, including its biggest drug, the ulcer and heartburn treatment Nexium, whose $1.28 billion in sales represented an 8% gain from the same period last year. The cholesterol drug Crestor advanced 51% to $480 million, and sales of the breast-cancer treatment Arimidex rose 31% to $379 million.