LONDON (Reuters) - AstraZeneca raised its sales and earnings forecasts for the year on Thursday, showing resilience after seeing off a $118 billion takeover approach from rival Pfizer two months ago.
Second-quarter sales and earnings both beat expectations, helped by several one-off factors, including a product-related payment from Pfizer worth $200 million.
Chief Executive Pascal Soriot has fought hard to demonstrate that AstraZeneca has a strong independent future and does not need the kind of mega-merger offered by its bigger U.S. rival, despite the fact some investors favor a deal.
He declined to comment on whether Pfizer might return but said he would flag AstraZeneca’s progress as a standalone group at an investor day on Nov. 18 - just before a mandatory six-month cooling off period ends and Pfizer can renew its approach.
Soriot has gained credit for his firm’s pipeline of promising new cancer drugs, while the respiratory business has been boosted by strong demand for Symbicort, which has taken business from GlaxoSmithKline’s rival drug Advair.
AstraZeneca moved to boost its lung drug franchise further on Wednesday by acquiring rights to Spanish group Almirall’s lung treatments in a deal worth up to $2.1 billion.
Sales in the quarter rose 4 percent to $6.45 billion, despite generic competition to some drugs, generating core earnings - which exclude certain items - up 8 percent at $1.30 a share.
Industry analysts, on average, had forecast sales in the quarter of $6.29 billion and earnings of $1.10 a share, according to Thomson Reuters data.
“There is clearly visible momentum across our business as we continue to execute on our strategy of returning to growth and achieving scientific leadership,” Soriot told reporters. “We now have one of the most exciting pipelines in the industry.”
He also said he hoped to strike partnering deals in the second half of 2014 for certain anti-infective and neuroscience drugs - including an experimental treatment for Alzheimer’s - which will help reduce some of the firm’s drug development costs.
Revenue in 2014 is now expected to be in line with 2013 at constant exchange rates - an increase on the previous forecast of a low to mid single-digit percentage decline - and core earnings per share are set for a low double-digit decline instead of a percentage decrease in the teens.
Deutsche Bank analyst Mark Clark said the results represented a “big beat” but were flattered by one-time items and the improved outlook for the year was likely to be taken in its stride by the market.
Shares in the company were little changed at 4,351 pence by 6:42 a.m. ET.
A raft of patent expiries will pressure sales and profits until at least 2017 but Britain’s second-biggest pharmaceuticals group is currently enjoying a partial reprieve, due to the delayed U.S. launch of a generic form of heartburn pill Nexium.
AstraZeneca now assumes, for planning purposes, that generic versions of prescription Nexium will reach the U.S. market on Oct. 1.
India’s Ranbaxy Laboratories holds the rights to sell the first generic copy of the popular drug but its continuing problems with meeting regulatory standards in manufacturing have delayed a launch.
AstraZeneca’s quarterly results were also boosted by a $200 million milestone payment from Pfizer, following the U.S. company’s launch of an over-the-counter version of Nexium in May, and a $80 million payment related to the Japanese launch of diabetes drug Forxiga.
The company enjoyed a further $117 million benefit from an inter-governmental agreement on a transfer pricing matter, which cut the tax rate in the period sharply.
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.
Jefferies analyst Jeffrey Holford said the fact that AstraZeneca had set an investor day for Nov. 18 implied it was “very unlikely” to invite Pfizer back for talks at the end of August, as it could in theory do under British takeover rules.
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 successful pursuit of Shire.
The U.S. company would not be drawn on its plans for AstraZeneca when it reported results two days ago but said it was still considering big deals.
Editing by Tom Pfeiffer and Greg Mahlich