Renowned biopharmaceutical company AstraZeneca (LON:AZN, Financial) reported its Q4 numbers last Thursday, February 5, and the dismal report card send the stock on a downward trajectory. Unfortunately the lofty expectations of the Street went unmatched when the results were compared to their estimates, and most of the drugs currently selling in the market of the various business lines failed to provide impressive sales numbers. Let’s get into the financial playbook of the biopharmaceutical major and decipher the prime highlights of the fourth quarter. Also, let’s take a brief look at what the management is expecting in the near future.
Going by the numbers
For the fourth quarter of 2014, the pharma company reported a whopping 23% drop in earnings to $1.18 billion from $1.54 billion, reported a year earlier. Earnings per share also missed the Street estimates by nearly $0.09 a share, and stood at $0.76 a share at the end of the quarter.
Revenue figures were rather grim with a 2.3% dip from $6.84 billion to $6.68 billion, on comparison on a year-over-year basis. Such a drop in revenue was attributed to lowered sales of its major drugs which are presently on sale over the counter. However, the company’s revenue did meet the analyst consensus for the quarter.
Notable was that though both the top and bottom line of the company showed a tremendous decline, the management were happy with the results and stated that they were in line with the company expectations. This meant that AstraZeneca was aware that both its revenue and profit would get dampened this quarter.
The company acheived a series of drug approvals and really saw phenomenal growth in the international emerging markets with special emphasis on China, where its drugs reported superb sales figures during the quarter. In fact, China has turned to become the second largest national market for the biopharmaceutical firm besides the U.S. But due to expiry of patents on two of its drugs linked to the company’s oncology drugs business and the loss of exclusivity of Nexium, its famous gastrointestinal therapy drug impacted the revenue and profits negatively for the quarter.
The company also has a waiting product pipeline for which it has incurred huge developmental costs that have been brought forward into the quarter, thereby depressing its margins and profitability of the final quarter for the 2014 fiscal year.
But there was positivity in the sales of its cardiovascular drug Onglyza, which grew by an astounding 119% year over year, and in its diabetes treatment drugs which improved by a whopping 139% backed by the recent launch of Farxiga and the rising demand for Bydureon.
The management was not perturbed by the earnings miss during the quarter and their CEO, Pascal Soriot, instead stated – “2014 was a remarkable year for AstraZeneca … We achieved a record six product approvals as we accelerated our pipeline across all main therapy areas…”
Another acquisition down the road is likely
Though the second largest drug maker of Britain remained cautious on perdicting sales for the next fiscal year and lowered its sales guidance for the fiscal year 2015, it urged to build its portfolio to make it stronger in the long term. That’s why AstraZeneca has just declared that it would buy Actavis’ (ACT, Financial) branded respiratory drug business in U.S. and Canada for a sum of $600 million. This move comes after the acquisition of Almirall’s lung drugs last July. Through such a planned acquisition the British drug maker would possibly attain global rights to inhaled medicines containing aclidinium. Also, as published in a recent Reuters report, AstraZeneca has predicted a huge jump in annual sales of its respiratory therapeutic unit to $45 billion by 2023. Nevertheless, first the Almirall acquisition and now this Actavis acquisition serve as the key factors behind the plan to achieve such astounding sales by the coming decade.
The CEO further stated during the earnings conference, “Our guidance for 2015 reflects our focus on creating value by investing in our new brands and exciting pipeline while we continue improving productivity to protect our profitability in the face of patent expiries … With the depth of our science and the momentum we have built across our organisation, we are on track to return to growth by 2017 and are well positioned to deliver our long-term goals.”
Concluding thoughts
Despite the fall in revenue depicted for the company’s existing drugs on a constant exchange rate basis going forward, the management is expecting earnings per share of the core business units to grow by mid-single digits in 2015. Such concrete thoughts have been reinforced by the boost predicted in AstraZeneca’s respiratory drug portfolio after the completion of these two vital acquisitions. Let’s stay tuned and keep an eye on whether any further acquisitions get approved by the management as it moves ahead and enters a new fiscal year, while new expectations are being built from all corners by investors and analysts worldwide.
