In July 2016, AstraZeneca announced a 22% drop in earnings for the second quarter of 2015. Their net loss was $3 million, compared to a $697 million profit over the same period a year earlier. Core operating profits also fell from $1.81 billion to $1.41 billion, and total revenue fell by 11%. So is AstraZeneca in trouble?
Well, not according to their CEO, Pascal Soriot. The fall in earnings was expected because two of the company’s biggest selling drugs had just come off patent. AstraZeneca saw a sharp drop in profits for the anti-cholesterol drug Crestor and the heartburn remedy Nexium, with sales falling by 29% and 13% respectively. This is attributed to competition from cheaper generic versions of the same medicines. AZ also saw growth in overseas markets, such as China and Japan, over the same reporting period. Market data from Bloomberg confirms that stock prices had taken a hit following the announcement but did begin to rise again in early August.
AstraZeneca’s CEO reassured interested parties that they have several projects in development that will compensate for the downturn. “Growth platform” medicines (drugs that aim to treat conditions with few current options) contribute almost two thirds of the company’s revenue. Recent partnerships focusing on cancer drugs are predicted to raise over $1 billion, as part of a strategy to increase AstraZeneca’s global market share. AZ has just announced some promising clinical trial results for Tagrisso, a tablet to treat certain forms of lung cancer, and further impressive projects are surely in the pipeline.
Despite their reassurance regarding the dip in company earnings, AZ has also announced that it will be paring down its workforce in the coming year, with job losses expected to impact sales and manufacturing roles within the company. It is unclear how this will affect employees in the US.
AstraZeneca now needs to reassure shareholders and deliver on its promise to increase its total sales to $45 billion over the next ten years. Current projects and partnerships include drugs targeting “big ticket” items like respiratory disease, cancer, and diabetes. Of course, these drugs will come off patent at some stage too, which can only be good news for patients.
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