6:37 AM 02/05/15
By Ben Hirschler
LONDON (Reuters) – AstraZeneca (AZN.L) said on Thursday it would buy Actavis’ (ACT.N) branded respiratory drug business in the United States and Canada for an initial $600 million as it reported disappointing fourth-quarter earnings.
AstraZeneca, which is seeking such deals to drive growth, will also pay another $100 million after Actavis agreed to changes in ongoing collaborations between the two firms.
Britain’s second-biggest drugmaker said 2015 sales would decline by a mid single-digit percent at constant exchange rates.
But adjusted or “core” earnings per share (EPS) are forecast to increase by a low single-digit percent this year, due to lower spending and plans to find partners on certain projects.
“We’ll behave as a biotech company would when it comes to products that are not core,” Chief Executive Pascal Soriot told reporters, citing a recent Alzheimer’s deal with Eli Lilly
The weak quarterly results knocked the shares back 1.9 percent by 1110 GMT (6:10 a.m. EST).
Citi analyst Andrew Baum said AstraZeneca appeared to have “kitchen-sinked” the quarter, or taken a deliberate hit to earnings by bringing forward some drug development costs. Deutsche’s Mark Clark said this should help secure 2015 profits.
The group, which fended off a $118 billion bid by Pfizer
Industry analysts had on average forecast sales of $6.79 billion and earnings of 82 cents, according to Thomson Reuters.
Buying the Actavis respiratory drugs builds on AstraZeneca’s acquisition of Almirall’s
Respiratory is a key therapeutic area for AstraZeneca, which has predicted a 75 percent jump in annual sales to $45 billion by 2023.
“We are on track to return to growth by 2017 and are well positioned to deliver our long-term goals,” Soriot said.
AstraZeneca’s promising cancer drugs have won over many investors but it faces near-term profit pressure from loss of exclusivity on older drugs, with the arrival of generic copies of heartburn and ulcer medicine Nexium in the United States a big challenge in 2015.
After reporting core 2014 EPS of $4.28, Soriot and his team have good reason to ensure earnings hold up this year, since management incentives only vest fully if earnings remain at or above $4.20.
(Editing by David Holmes, Jane Merriman and Susan Thomas)
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