UPDATE 3-Flu helps AstraZeneca lift outlook but market wary

Thu Oct 29, 2009 11:31am EDT

* 2009 EPS now seen $6.20-6.40 vs $5.70-6.00 previously

* Q3 core earnings of $1.68 beat $1.38 consensus

* One-offs flatter results; analysts worry over Brilinta

* Shares down 1.4 percent

(Adds latest shares, detail on Brilinta)

By Ben Hirschler

LONDON, Oct 29 (Reuters) - AstraZeneca (AZN.L) increased its full-year outlook for the second quarter in a row on Thursday as earnings jumped 28 percent, beating forecasts, helped by earlier-than-expected revenues from its swine flu vaccine.

But the one-off nature of the gain from flu and other factors diluted the strong results, and investors fretted over prospects for new blood thinner Brilinta, pushing shares in the Anglo-Swedish drugmaker lower.

AstraZeneca has been helped this year by the resilience of the pharmaceutical sales and delays in cheap generic versions of heart drug Toprol XL and cancer treatment Casodex -- though both have now been launched in the United States.

The sale of H1N1 swine flu vaccine to the U.S. government by the group's MedImmune unit has been an added bonus, contributing $152 million to sales in the third quarter -- a lot more than the nominal $25 million or so many analysts had forecast.

"Overall, the business has performed more strongly on the top line than we had anticipated and we haven't experienced quite the extent of the headwind that we had anticipated at the beginning of the year," said finance chief Simon Lowth.

Long-term concerns remain, however, given the threat of generic competition to AstraZeneca's top-selling medicines such as heartburn drug Nexium, Seroquel for schizophrenia and, further off, cholesterol drug Crestor.

Morgan Stanley analyst Andrew Baum said the outlook for the company "gets much tougher from here".

Lowth acknowledged one-offs had helped in the quarter but said key drivers, including Crestor, were doing well.

"Even if we strip out a couple of the unanticipated upsides ... such as Toprol and H1N1 ... we've still maintained strong growth of the business of 5 percent or so," he told reporters.

AstraZeneca's core pretax profit rose 28 percent to $3.4 billion in the third quarter, equivalent to core earnings per share (EPS) of $1.68, on sales up 5 percent at $8.2 billion.

The mean consensus forecast had been for core earnings, which exclude certain restructuring costs and charges, of $1.38 and sales of $7.9 billion, according to Thomson Reuters I/B/E/S.

AstraZeneca now predicts full-year EPS of $6.20-6.40 versus $5.70-6.00 previously forecast.

NOT SO BRILLIANT?

AstraZeneca has seen an improvement in its pipeline prospects this year -- but things are not going all its way.

On Wednesday, it pulled regulatory submissions for its experimental lung cancer drug Zactima and on Thursday investors were unnerved by suggestions its key experimental heart drug Brilinta did not work so well when patients also got a high dose of aspirin. [ID:nLS626291] [ID:nLT340442]

The firm also said it had reached an agreement in principle with U.S. attorney's office in Philadelphia to resolve an investigation related to its schizophrenia drug Seroquel sales and marketing practices.

The settlement accounts for $520 million of the $538 million provisions taken in the first nine months of the year, it said.

Other major drugmakers in Europe and the United States have also reported solid results this quarter, helped by an industry-wide cost-cutting drive that has softened the impact of generic competition to many products.

Those companies with vaccine capacity also stand to book exceptional profits from the sale of H1N1 swine flu vaccine in the fourth quarter, as highlighted by GlaxoSmithKline (GSK.L) on Wednesday. [ID:nLR454208]

Swine flu will also be a focus when Sanofi-Aventis (SASY.PA), the world's biggest flu vaccine manufacturer, wraps up the Big Pharma reporting season on Friday.

AstraZeneca is a relatively small player in the flu market but it has a $453 million contract with the U.S. government to supply around 40 million doses of a nasal spray form of H1N1 vaccine.

Shares in AstraZeneca, which were off 1.4 percent by 1515 GMT, underperforming a 0.6 percent decline in the European drugs sector .SXDP, trade at around 7.7 times forecast 2010 earnings, a discount to British-based rival Glaxo, reflecting concerns about upcoming generic competition. (Additional reporting by Kate Kelland; Editing by Rupert Winchester and Jon Loades-Carter)