* Mid-to-high single digit percent fall seen in 2013 sales
* EPS to fall significantly more as operating costs rise
* Q4 sales $7.28 billion, vs I/B/E/S consensus $7.20 bln
* Q4 core EPS $1.56 vs $1.35, helped by tax adjustment
* Shares fall 5.4 percent on worse-than-expected outlook
(Adds CEO comments, further reaction, latest shares)
By Ben Hirschler
LONDON, Jan 31 AstraZeneca's new boss
said sales and profits would both fall sharply in 2013 as the
drugmaker struggles to turn itself around by investing more
in-house and on potential acquisitions.
Chief Executive Pascal Soriot forecast a mid-to-high single
digit percentage fall in revenue this year, as patent expiries
continue to erode business, with earnings declining
"significantly more" due to increased operating costs.
The 2013 outlook was worse than the fall of around 3 percent
in sales that analysts had been expecting, and shares in the
group slumped 5.4 percent by 1150 GMT on Thursday.
A decision to keep share buybacks on hold and not increase
the dividend for the first time in a decade added to the
Soriot also withdrew mid-term planning assumptions for
profit margin and revenue that had been set by previous
management, increasing his freedom to pursue a strategy of
investing for future growth.
Analysts at Citigroup said he appeared to be setting the
scene for doing new deals - something the market has speculated
about intensely in recent months.
"We will be open to more disruptive acquisitions, larger
acquisitions if they make sense," Soriot told reporters.
But he added: "You have to consider the likelihood of that
is lower because I don't think we need a large-scale acquisition
Soriot said any deals he struck would complement increased
investment in five existing growth areas - the new heart drug
Brilinta, emerging markets, diabetes care, respiratory medicine
Faced with loss of exclusivity on once best-selling
medicines and a thin pipeline of new drugs, AstraZeneca needs to
consider bold moves to get back on its feet.
Yet Soriot has to tread carefully when it comes to spending
if he is to avoid upsetting investors who own the stock as an
income play, given its near 6 percent dividend yield.
He is due to set out his strategy in detail during a
keenly-awaited investor day on March 21 in New York.
Many analysts expect he will follow the lead set by
Bristol-Myers Squibb, which has used what it calls a
"string of pearls" strategy to boost revenue through small or
mid-sized purchases. But there has also been talk of a $20
billion-plus deal, such as buying Shire.
Results for the last quarter of 2012, which came better than
expected, took second place to the tough outlook for 2013.
Fourth-quarter sales fell 16 percent to $7.28 billion,
generating core earnings, which exclude certain items, down 3
percent at $1.56 per share. The slower decline in earnings
reflected lower costs and a favourable tax adjustment.
Analysts had, on average, forecast sales of $7.20 billion
and earnings of $1.35 per share, according to Thomson Reuters
I/B/E/S. Stripping out the tax effect, EPS was broadly in line.
BIG HITS TO COME
AstraZeneca is not alone in facing big patent losses.
But while rivals such as GlaxoSmithKline and Sanofi
are past the worst, AstraZeneca's biggest losses are
to come, with Nexium for stomach acid and cholesterol fighter
Crestor losing U.S. protection in 2014 and 2016 respectively.
As a pure pharmaceuticals group, without the cushion of
alternative revenue streams found at more diversified rivals,
AstraZeneca is particularly exposed to patent losses on key
Short-term wins from its new drug pipeline look unlikely,
with expectations for experimental rheumatoid arthritis drug
fostamatinib dwindling after disappointing clinical trial
results last month.
One established medicine that may surprise on the upside is
diabetes drug Onglyza, which is marketed with Bristol-Myers and
could potentially show a heart benefit in a clinical study that
will report later this year.
Heart drug Brilinta, which had been viewed as big winner
initially, continued to struggle to generate sales in the three
months to end-December, with sales totalling $38 million.
AstraZeneca shares have gained ground in recent months but
the stock remains the laggard of the global pharmaceutical
sector, trading on around 8.6 times expected earnings, a 30
percent discount to large British rival GSK.
The group has already slashed thousands of jobs to cut costs
in recent years, and two weeks ago Soriot removed the heads of
both research and worldwide sales.
(Editing by Dan Lalor and Jane Merriman)