Shares slump is bitter pill for AstraZeneca

By ELLIOT WILSON
Updated: 04:04 EST, 29 October 2010

AstraZeneca, which is under pressure over rising legal costs, higher competition and a weak product pipeline, saw its shares tumble after third-quarter earnings disappointed investors.

Pretax profits at the Anglo-Swedish group fell in the third quarter to £1.4billion, down 26 per cent on a year ago. Revenues slipped 4 per cent to £4.95billion. Astra is stricken by two key weaknesses. Its roster of new drugs is perilously thin. And some of its existing blockbuster pills are under suspicion of harbouring worrying side-effects.

During the latest quarter, the firm set aside £127million to settle 18,250 American legal actions against its anti-psychotic drug Seroquel, which has been blamed for causing diabetes in some patients. A further £170million was put aside to settle other legal claims.

Hit: Pharmaceuticals giant AstraZeneca saw its profits fall 26 per cent

Despite health concerns, sales of Seroquel jumped 7 per cent in the quarter to £816million. Income from its cholesterolfighting drug Crestor rose 20 per cent, to £860million.

But an expected windfall in sales of swine flu vaccines failed to materialise after the spread of the airborne virus was halted, eating into profits. 

Astra’s shares fell 57.5p at 3188p. Analysts remain bearish on the company, with brokerage Charles Stanley noting thirdquarter results had ‘underwhelmed the market’. Investors are also downbeat on Astra’s pipeline of new drugs – seen as key to its future profitability.

Blockbuster drugs including Arimidex (which battles breast cancer) and Nexium (heartburn) are nearing the end of their patent period, when generic drug makers will be able to flood the market with cheaper copies of the treatments.

Worse, analysts are bearish on the stock over the long haul.