LONDON AstraZeneca's sales tumbled 21 percent in the second quarter, punished by generic competition to its best-selling antipsychotic medicine Seroquel and pressure on health spending in Europe.
Continued supply chain disruptions triggered by problems with a new IT system at a plant in Sweden added to the group's woes and the shares fell 1.8 percent by 04.30 a.m. EDT in a flat market for European drug stocks.
With patent losses rapidly eroding revenue and few new drugs to replace them, Britain's second-biggest drugmaker is throwing itself into deal-making to bolster the pipeline, following the early exit of its chief executive at the end of May.
Last month it struck a deal with Bristol-Myers Squibb to share the cost of buying U.S. diabetes specialist Amylin Pharmaceuticals for $7 billion, the largest of a number of recent bolt-on acquisitions.
Finance head Simon Lowth, who is standing in as interim CEO, said AstraZeneca would continue to "invest hard" to bolster its product line-up using a range of deal structures, from licensing agreements to outright purchases of smaller companies.
"We're always actively looking outside for high-quality science, high-quality projects and high-quality product portfolios to bring into AstraZeneca," he told reporters.
As a pure pharmaceuticals group, AstraZeneca lacks the cushion of alternative revenue streams found at more diversified rivals, making the hunt for new prescription drugs vital.
Sales in the quarter were $6.66 billion, generating "core" earnings, which exclude certain items, down 12 percent at $1.53 a share, AstraZeneca said on Thursday.
Analysts, on average, had forecast sales of $6.95 billion and earnings of $1.39 a share, according to Thomson Reuters I/B/E/S. The beat on earnings was helped by the release of a tax provision in the second quarter, which boosted core earnings by 19 cents a share.
AstraZeneca reiterated its forecast for a fall in full-year core earnings to between $5.85 and $6.15 a share, against $7.28 in 2011, with revenues set to decline by a low- to mid-teen percentage rate this year in constant currencies.
Tim Anderson of Bernstein said the company's five-year outlook was uninspiring, given the string of generic losses it faces and the thin late-stage product pipeline.
In addition to this year's loss of patent cover on Seroquel, the heartburn pill Nexium and top-selling cholesterol fighter Crestor lose U.S. protection in 2014 and 2016 respectively.
Like other big drugmakers, the Anglo-Swedish group has been hit by falling drug prices in Europe, where the euro crisis has prompted governments to take exceptional measures to curb spiraling healthcare costs.
Revenues were reduced by an estimated $300 million in the second quarter as a result of government cost cutting in Europe and some other markets, it said.
Its larger rival GlaxoSmithKline was forced on Wednesday to revise down its 2012 sales outlook - predicting a flat year, rather than the hoped-for return to growth - largely as a result of the worsening European situation.
AstraZeneca's U.S. sales slumped 29 percent in the quarter in constant currency terms, with the loss of Seroquel accounting for 80 percent of the hit, while European revenues were off 20 percent and emerging markets - the supposed savior of Big Pharma - grew just 1 percent.
Supply chain interruptions caused by the plant problems in Sweden hit emerging markets particularly hard. Overall, the issue impacted group revenue by around 2 percent in the quarter.
Sales of heart drug Brilinta, one of the company's few new products, were a meager $18 million, as launches of the new antiplatelet medicine continued, and revenue from Crestor fell 5 percent to $1.59 billion.
(Editing by Chris Wickham and David Cowell)