By Ben Hirschler
LONDON (Reuters) - AstraZeneca (L:AZN) said on Thursday it had agreed to buy Actavis' (N:ACT) branded respiratory drug business in the United States and Canada for an initial $600 million (£395 million) as it reported weak fourth-quarter earnings.
AstraZeneca, which is seeking external deals to ensure growth, will also pay another $100 million after Actavis agreed to a number of changes to ongoing collaborations between the two firms.
Britain's second-biggest drugmaker posted fourth-quarter results that fell short of expectations and said 2015 sales revenue would decline by a mid single-digit percent at constant exchange rates.
Adjusted or "core" earnings per share, however, are forecast to increase by a low single-digit percent this year.
The shares slid 2.5 percent by 0845 GMT.
Citi analyst Andrew Baum said AstraZeneca appeared to have "kitchen-sinked" the quarter, or taken a deliberate hit to earnings by increasing drug development costs sharply in the period.
The British group, which saw off a $118 billion bid by Pfizer (N:PFE) last year, said its sales in the fourth quarter fell 2 percent to $6.68 billion, generating core earnings down 38 percent at 76 cents a share.
Industry analysts had on average forecast sales in the quarter of $6.79 billion and earnings of 82 cents a share, according to Thomson Reuters.
Buying the Actavis respiratory drugs builds on AstraZeneca's acquisition of Almirall's (MC:ALM) lung drugs last July and gives it global rights to inhaled medicines containing aclidinium, which helps open airways. Actavis had owned North American rights under an earlier agreement with Almirall.
Respiratory is a key therapeutic area for AstraZeneca, whose Chief Executive Pascal Soriot has predicted a 75 percent jump in annual sales to $45 billion by 2023.
"We are on track to return to growth by 2017 and are well positioned to deliver our long-term goals," Soriot said.
AstraZeneca has won over many investors with its line-up of new cancer drugs but it faces near-term pressure on profits from cheap generic copies of older drugs, with the arrival of copies of heartburn and ulcer medicine Nexium in the United States a big challenge in 2015.
Although sales are set to slide more this year, shareholders may take some heart from AstraZeneca's forecast that core earnings will increase from the $4.28 reported for 2014.
Soriot and his team have good reason to ensure earnings do not slip, since management incentives only vest fully if EPS remains at or above $4.20.