LONDON AstraZeneca (AZN.L) has the chance next week to showcase its financial resilience after resisting a $118 billion takeover bid from Pfizer (PFE.N) - and, ironically, it will get a helping hand from its U.S. foe.
Second-quarter results from the British drugmaker will be boosted by a $200 million milestone payment from Pfizer, following the U.S. company's launch of an over-the-counter version of AstraZeneca's heartburn medicine Nexium in May.
AstraZeneca's Chief Executive Pascal Soriot will also be able to point to better results than initially expected due to a delay in generic versions of the prescription form of Nexium when he unveils results on July 31.
A strong showing by AstraZeneca in the near term - both in financial terms and in progress with its drug pipeline - is crucial for Soriot, who needs to pull out all the stops to prove that Pfizer's offer undervalued the firm.
Many investors believe Pfizer will be back in late November after an enforced six-month cooling-off period - assuming AstraZeneca does not invite it back before then - because the logic of a deal remains strong.
Pfizer would slash its tax bill by moving its tax address to Britain, in a process known as inversion. The case for such tax inversions remains compelling, as evidenced by AbbVie's (ABBV.N) successful pursuit of Shire (SHP.L).
AstraZeneca earnings may be down from a year ago, however, reflecting ongoing competition from copycat forms of many other medicines, which will remain a drag on growth until about 2017.
The $200 million Pfizer payment is expected to be booked as other income and included in core earnings per share (EPS), AstraZeneca's preferred measure of performance.
The payment, triggered by the launch of OTC Nexium, is set to boost EPS by 12 cents, according to Leerink analyst Seamus Fernandez, who rates the stock a market perform and forecasts core EPS of $1.13.
It is not clear if all analysts have yet factored in this one-off windfall, with consensus forecasts pointing to a quarterly core EPS of $1.06, down from $1.20 a year ago.
RANBAXY'S PAIN IS ASTRAZENECA'S GAIN
AstraZeneca's sales for the quarter are forecast to be little changed from a year ago, at about $6.27 billion, as loss of exclusivity on some aging products is offset by the buyout of a previous diabetes joint venture with Bristol-Myers Squibb (BMY.N).
New diabetes drug Farxiga is expected to be a bright spot in the quarter, although sales of the older diabetes treatments Bydureon, Byetta and Onglyza are proving sluggish.
Lung drug Symbicort is also performing well in the United States and has taken business from GlaxoSmithKline's (GSK.L) Advair, which is now flagging.
New heart drug Brilinta is expected to see some sales growth in the quarter, although Jefferies analysts said prescription data for the product showed no sign of a breakout from recent lackluster trends. Jefferies has AstraZeneca shares as a hold.
AstraZeneca has a program of clinical trials underway involving more than 80,000 patients to try and expand the use of Brilinta, but it will take several years to deliver results.
A major bonus for Soriot and his team is the lack of any generic competition to prescription Nexium in the United States, despite the expiry of patent protection on the product which could have cleared the way for a launch at the end of May.
India's Ranbaxy Laboratories (RANB.NS) holds the rights to sell the first generic copy of the popular prescription medicine but its continuing problems with meeting regulatory standards in manufacturing have delayed a launch.
Nexium had global sales last year of $3.87 billion and U.S. sales of $2.12 billion.
(Editing by David Clarke)