Astrazeneca misses fourth quarter target but eyes growth in 2015

After a year of accelerating investment in its drug pipeline, drug group Astrazeneca's earnings per share fell more than expected in the fourth quarter to drag the full year number short of the market's target.

As it simultaneously announced the $600m respiratory drug acquisition, the FTSE 100 giant reported fourth-quarter revenues up 2% to $6.68bn, slightly shy of forecasts, and made a statutory operating loss of $349m due to restructuring, impairments and previous purchases.

Even with these exceptional costs taken out, core operating profit of $1.2bn failed to meet analyst estimates of $1.5bn for the quarter, with core EPS slumping 28% at constant exchange rates to $0.76.

This meant full year earnings fell 8% to $4.28 per share, shy of consensus expectations of $4.39.

However, chief executive Pascal Soriot hailed a "remarkable year" of four quarters of revenue growth, six product approvals and prospects for a return to growth.

2015 is expected to deliver an increase in core EPS by a "low single-digit percent" given exchange rates remaining constant.

Said Soriot: "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 expires.

"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."

Astrazeneca, which earlier in the week gained planning permission for its new global headquarters in Cambridge, also announced it had agreed to acquire the US and Canadian respiratory drugs business of Actavis for an initial $600m plus low single-digit royalties based on future revenues.

Actavis' two lead products for chronic obstructive pulmonary disease (COPD), Tudorza Pressair and Daliresp, had combined annual sales in the US of approximately $230m in 2014.

Broker Shore Capital said the top line was slightly light expectations but this was partly due to the $113m negative effect from the change in accounting for the US branded pharmaceutical fee.

Analyst Brian White said the earnings figure means the company has largely delivered its 2014 guidance of a 15% fall in EPS, "helped in no small part by the absence of a US Nexium generic during quarter four, flattering sales but suggesting a more dramatic decline in 2015 - although this is already baked into guidance".