Thursday November 1, 06:40 PM
AstraZeneca profit deteriorates, as generic drugs bite
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LONDON (AFP) - Anglo-Swedish pharmaceuticals giant AstraZeneca (LSE: AZN.L - news) said Thursday that net profit fell 15 percent in the third quarter owing to increased competition from generic drugs and rising costs.
Net profit sank to 1.34 billion dollars (931 million euros) in the three months to September, compared with the same period in 2006, the group said in a quarterly earnings statement.
The poor performance was despite revenue rising by almost 10 percent to 7.15 billion dollars.
AstraZeneca chief executive David Brennan said the group remained "on track to meet its earnings target for the full year."
However, worries about the extent of competition from generic drugs -- made by other companies once patent protection expires -- sent the share price tumbling. In Thursday afternoon trade, AstraZeneca stood at 2,312 pence, down 2.57 percent, on London's FTSE 100 (news) index of leading shares.
"The outlook in the longer term for AstraZeneca does not look good as all five of its top selling products are going out of patent in the next decade," said analyst Jeremy Batstone-Carr at the broker Charles Stanley.
Profits during the third quarter were also hit by the cost of a restructuring programme related to AstraZeneca's acquisition of US biotechnology company MedImmune (NASDAQ: MEDI - news) for 15.6 billion dollars earlier this year.
Faced with soaring costs, AstraZeneca unveiled plans in July to slash 7,600 jobs by 2010.
The group said Thursday that pre-tax profit fell 16 percent to 1.88 billion dollars in the third quarter but that was still better than analyst forecasts for 1.78 billion.
AstraZeneca intends to cut about 12 percent of its global workforce over the next two years as part of a major restructuring programme which will cost 1.6 billion dollars, more than triple an initial forecast of 500 million dollars.
The group, known for producing the cholesterol treatment Crestor and breast cancer medicine Arimidex, last month lost its exclusive patent for its blockbuster asthma treatment Symbicort after generic producers challenged it in the European Patent Office.
During the third quarter, many of AstraZeneca's major products came in below analyst forecasts. Sales of heartburn treatment Nexium fell 1.0 percent to 1.29 billion dollars, compared with expectations for 1.33 billion.
Seroquel, AstraZeneca's schizophrenia treatement, did better, with sales breaking the 1.0 billion-dollar mark for the first time.
Last week, AstraZeneca's larger British rival, GlaxoSmithKline (LSE: GSK.L - news) , said it too would cut jobs and costs after posting a fall in third-quarter profits on sliding sales of controversial diabetes drug Avandia.
Demand for Avandia has evaporated after US medical journals recently concluded the drug significantly increased the risk of heart attack and cardiovascular problems.
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