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LONDON (Alliance News) - AstraZeneca PLC Thursday moved to further bolster its respiratory drug pipeline by acquiring the rights to Actavis PLC's branded respiratory business in the US and Canada, as it reported lower earnings for 2014 due to increased investments it is making in accelerating its existing portfolio.
The news came as medical devices company Smith & Nephew PLC reported higher 2014 earnings, buoyed by a sustained improvement in US reconstruction markets and higher growth in emerging markets, and GlaxoSmithKline PLC sold its entire stake in Denmark's Gemab AS.
AstraZeneca is accelerating its drug pipeline because many of its existing best-selling drugs are reaching the end of their patents in a relatively short space of time. It had also pledged to investors that it would move faster on the refresh in the wake of its successful defence last year against a takeover attempt by US rival Pfizer Inc. Respiratory drugs are one of the key areas AstraZeneca is targeting.
The pharmaceutical giant said it will buy the rights to Actavis' North American respiratory business for an initial USD600 million plus low single-digit royalties above a certain revenue threshold. AstraZeneca will also pay Actavis an additional USD100 million and Actavis has agreed to a number of contractual consents and approvals, including certain amendments to the ongoing collaboration agreements between AstraZeneca and Actavis. It didn't give any further details of the amendments.
The deal means AstraZeneca will own the development and commercial rights in the US and Canada for chronic obstructive pulmonary disease treatments Tudorza Pressair and Daliresp. It will also own development rights in the countries for LAS40464, a dry powder inhaler treatment already approved in the EU under the brand name Duaklir Genuair.
"The acquisition of Tudorza Pressair and Daliresp will immediately add on-market revenues and complements AstraZeneca's respiratory portfolio by broadening the choice of treatments and formulations offered to patients and physicians. The two products had combined annual sales in the US of approximately USD230 million in 2014," the company said in a statement.
AstraZeneca reported core earnings per share of USD4.28 for 2014, down 15% on the year after its fourth quarter core EPS dropped 38% to USD0.76, missing analysts' expectations of USD0.82.
Revenue rose 1% on the year to USD26.10 billion for 2014 as a whole, but was down 2% in the fourth quarter to USD6.68 billion. The company suffered an exchange rate hit: revenue was up 3% for the full year and 2% in the fourth quarter at constant rates, while core EPS dropped 8% during the year and 28% in the fourth quarter at constant rates.
The company said earnings were down due to investments it is making in its growth platforms and in accelerating its drugs pipeline. It had previously forecast that earnings would suffer due to these investments for a couple of years, with the company set to return to growth in 2017.
Revenue from the company's biggest seller, cholesterol and cardiovasuclar treatment Crestor, fell to USD1.39 billion in the fourth quarter from USD1.46 billion a year before, as a result of accounting changes for the branded pharmaceutical fee in the US and lower prescriptions, generic competition in Australia and price pressure in Japan, although this was partially offset by stronger growth in China.
For 2015, AstraZeneca expects overall sales revenue to decline by mid single-digit percent at constant exchange rates, while core EPS is expected to increase by low single-digit percent, also at constant rates.
"Our guidance for 2015 reflects our focus on creating value by investing in our new brands and exciting pipeline while we continue improving productivity to protect our profitability in the face of patent expiries. With the depth of our science and the momentum we have built across our organisation, we are on track to return to growth by 2017 and are well positioned to deliver our long-term goals," Chief Executive Pascal Soriot said in a statement.
AstraZeneca said it will pay a second interim dividend of USD1.90 a share, bringing its full-year dividend to USD2.80. It said it is sticking to its policy of maintaining or growing dividends each year.
"AstraZeneca has delivered a notably weak fourth quarter and a disappointing sales outlook for 2015. Nevertheless, the company will look to the cost base to protect core earnings as best as possible. The pipeline opportunities remain compelling but these results once again highlight the near-term hurdles before the medium-term return to growth," Berenberg wrote in a note to clients. It is retaining its Hold rating on the stock.
Big UK rival GlaxoSmithKline late Wednesday said it has agreed to sell nearly 4.5 million shares in Genmab through an accelerated bookbuild. The shares are its entire 7.9% stake in the Danish business. The final offer price was set at DKK430.00 a share, meaning gross proceeds were about GBP194 million.
Meanwhile, medical devices company Smith & Nephew PLC Thursday reported higher revenue and trading profit for 2014, although earnings per share were hit by restructuring and acquisition costs.
Its trading profit rose to USD1.06 billion for the year as a whole, from USD987 million in 2013, as revenue rose to USD4.62 billion, from USD4.35 billion. Trading profit rose to USD325 million in the fourth quarter, from USD292 million a year earlier, as revenue rose to USD1.25 billion, from USD1.18 billion.
The company said its trading profit margin improved to 26.1% from 24.8%, benefiting from an insurance claim settlement arising from a flood at its Hull manufacturing site in December 2013.
The company's trading profit beat analysts' expectations of USD1.05 billion, and although its earnings per share excluding exceptional costs of USD83.2 cents beat the USD76.9 cents it posted in 2013, it missed expectations of between USD86.5 cents and USD90.9 cents.
In Its Advanced Surgical Devices business, US revenue growth was up 3%, but other established markets were flat. Revenue in its emerging and international markets rose 17%, including an 8% rise in its Sports Medicine Joint repair franchise thanks to a number of product launches earlier in the year.
In Advanced Wound Management revenue fell 2%, due to Smith & Nephew having been required to halt distribution of RENASYS during the year, and competitive pressures in Europe. This offset a strong performance from its advanced wound bioactives products.
"We improved our existing businesses, driving a sustained improvement in US Hip and Knee Implants and building rapidly in the emerging markets. We strengthened our higher growth platforms, acquiring ArthroCare to give us a broader sports medicine portfolio. We created new growth platforms with the mid-tier portfolio and Syncera, disruptive models that fulfil unmet customer needs, and Advanced Wound Bioactives again delivered double-digit growth," Chief Executive Olivier Bohoun said in a statement.
The company expects to deliver higher underlying revenue growth in 2015 compared with 2014, and also to report a further improvement in its trading profit margin.
"Whilst the journey to transform Smith & Nephew continues, we are now set to increasingly reap these benefits and accelerate our growth. Consequently, we are confident that the Group will deliver higher underlying revenue growth and trading profit margin in 2015," Bohoun said.
The company proposed a final dividend of 18.6 cents, meaning its full-year dividend will be 29.6 cents, an 8% increase on the 2013 dividend.
Shares in AstraZeneca are trading down 3.0% at 4,549.00 pence Thursday morning, making it the worst-performing stock in the FTSE 100, while shares in GlaxoSmithKline are trading up 1.9% at 1,504.00 pence, and Smith & Nephew is trading up 1.3% at 1,183.00 pence.
By Steve McGrath and Hana Stewart-Smith; stevemcgrath@alliancenews.com; @stevemcgrath1; hanassmith@alliancenews.com; @HanaSSAllNews
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