Astra eyes slower growth

February 8, 2001
Web posted at: 1939 GMT

By Staff Writer Martha Slud

NEW YORK (CNNfn) - Drugmaker AstraZeneca PLC posted a 16 percent increase in profit for 2000 on Thursday, but warned that this year's growth likely will be much slower as it faces the looming patent expiration of its best-selling medication.

The Anglo-Swedish pharmaceutical company has been through a tough period, with more challenges ahead. The firm is battling to boost sales of its flagship medication, ulcer treatment Prilosec (known as Losec outside the United States), which could lose its patent exclusivity as early as October. Prilosec is the world's biggest selling drug, with revenue of $6.26 billion in 2000. Meanwhile, the company hopes to launch Nexium, a next-generation version of the drug, in the key U.S. market early this year.

To compensate for lost sales of Prilosec, the company is aggressively developing new products, including an experimental cholesterol-lowering treatment, Crestor, and Iressa, a lung cancer drug. Despite a pipeline brimming with promising new products, AstraZeneca faces a situation in which "the going is likely to get worse before it gets better," Merrill Lynch drug analysts noted in a recent research report.

The company, which reports its results in U.S. dollars, earned $4.11 billion, or $1.64 per share, for full-year 2000, from $3.54 billion, or $1.41 per share, in 1999. Sales rose 8 percent to $15.8 billion.

But for 2001, growth is expected to drop off significantly. The company forecast "mid-single digit sales growth" and earnings per share growth "slightly ahead of this."

Investors reacted warily to the forecast, pushing down AstraZeneca's American depositary receipts (ADRs) $1.13 to $43.50 in afternoon trading.

In a telephone interview with CNNfn.com, AstraZeneca CEO Tom McKillop said the company made conservative estimates for 2001 based on the expectation that Prilosec will face cheaper, generic rivals later this year. However, he said, the company is pursuing court cases that could potentially extend the life of the patent and delay copycat versions of the lucrative drug.

"We have made sound calculations on the basis of fairly conservative assumptions," he said. "We think we have a very good chance of winning the court cases and we will not have generic competition. If so, the numbers would be revised upwards."

AstraZeneca, meanwhile, hopes that U.S. sales of Nexium will help compensate for an anticipated decline in sales of Prilosec. But the Food and Drug Administration has not yet ruled on the drug's application. The company, though, said Thursday it is "moving to closure on the last few significant issues with the FDA" and is still planning a first-quarter product launch. The drug already has gone on the market in the United Kingdom, Germany, and other European markets.

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"It's true that it has taken a little bit longer than we expected but that kind of thing happens with regulatory authorities -- nothing unusual in that," McKillop said.

Analysts, though, are concerned that Nexium may not offer enough of an advance over Prilosec to persuade doctors to prescribe the new drug instead of a cheaper, generic version of the older treatment.

Meanwhile, Wall Street is awaiting word on a late-stage clinical study comparing Crestor, the company's closely awaited cholesterol treatment, to Pfizer Inc.'s (PFE: Research, Estimates) blockbuster Lipitor, the market leader. The results should be released at a medical conference in late March.

AstraZeneca hopes to apply for regulatory approval of the drug by the middle of this year, with a launch possible by late 2002.

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AstraZeneca

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