AstraZeneca names Dunoyer CFO as drug sales, profits drop

LONDON Thu Oct 31, 2013 7:03am EDT

LONDON (Reuters) - AstraZeneca (AZN.L) promoted Marc Dunoyer to be its new chief financial officer on Thursday, plugging a gap in the British drugmaker's top management team as it grapples with falling sales and profits.

Dunoyer, 61, who joined from rival GlaxoSmithKline (GSK.L) in June and currently heads portfolio and product strategy, will replace well-respected finance chief Simon Lowth, whose departure to join BG Group (BG.L) had been announced.

Hit by generic competition to key drugs, sales and profits at AstraZeneca continued to slide in the third quarter, underscoring the challenge facing Chief Executive Pascal Soriot, who has been in the job for just over a year.

Lowth has been viewed as a steady hand on AstraZeneca's finances and the appointment of Dunoyer, who lacks recent direct CFO responsibility, may concern some investors.

"AstraZeneca's heavy income-focused investor base will likely be concerned over the news of Mr. Dunoyer's appointment," Citi analyst Andrew Baum said in a note.

"While a very talented and experienced industry executive, in our view, investors could fear increased risk to near-term EPS (earnings per share) and AstraZeneca's flat dividend commitment through either increased internal investment or a greater propensity to M&A."

Dunoyer, who is a French national like Soriot and takes over on November 1, is a qualified accountant, but his most recent roles at GSK were as head of rare diseases and Japan.

Soriot told reporters Dunoyer offered a blend of strategic thinking and financial expertise, adding his appointment did not signal any change in dividend policy or acquisition strategy, which has so far focused on smaller deals.

Panmure Gordon analyst Savvas Neophytou said the company, at its current stage, probably needed a CFO who was "more strategic than technocratic".

Soriot and Dunoyer have their work cut out to turn around AstraZeneca after years of failure to come up with new drugs to replace those reaching the end of their patent life.

Improving AstraZeneca's record in drug research is Soriot's top priority, but he told Reuters in June that turning around the company would take three to four years.

SPENDING MORE

It will also require investment in the science behind new medicines and AstraZeneca said it expected to spend more, with 2013 spending increasing at the upper end of its prior guidance range of a low-to-mid single digit percentage rise on 2012.

Mark Clark of Deutsche Bank said higher operating costs suggested there would be "minor" downgrades in earnings forecasts.

The shares fell 2 percent by 1045 GMT following news of Dunoyer's appointment and the latest weak results.

Sales in the quarter slid by 6 percent to $6.25 billion, weighed down by the loss of patent protection on several drugs - including, in some markets, its top-selling cholesterol fighter Crestor - while EPS tumbled 28 percent.

"Core" operating profit of $2.03 billion, which excludes certain items, generated EPS of $1.21. Analysts had, on average, forecast core EPS of $1.22 and sales of $6.44 billion, according to Thomson Reuters.

The group reiterated its expectation for a mid-to-high single digit percentage fall in revenue this year, with earnings expected to decline significantly more, due to rising research and marketing costs.

Near-term hopes are pinned on new heart drug Brilinta, although its progress to date has been slow, with sales in the quarter edging up to $75 million from $65 million in the three months to end-June.

A U.S. inquiry launched this month into a clinical trial involving the drug also raises uncertainties.

Growth in drug sales in China, where destocking and an anti-corruption drive disrupted business, slowed to 13 percent from 21 percent in the second quarter. But AstraZeneca fared a lot better than GlaxoSmithKline, the company at the centre of the scandal, whose China sales crashed 61 percent in the third quarter.

Overall revenue in emerging markets was up 5 percent and AstraZeneca said it expected a high single digit revenue increase in emerging markets for the full year.

(editing by Elizabeth Piper)