By Ben Hirschler
LONDON (Reuters) - AstraZeneca's (L:AZN) first-quarter profit was hit by generic competition to cholesterol fighter Crestor and higher costs, but the drugmaker expects a better second half and said it remained on track for a promised return to sales growth in 2018.
Core operating profit tumbled 46 percent to $896 million (663 million pounds), well below market forecasts, and Crestor sales fell 38 percent as cheap copycat versions of the drug stole market share in Europe and Japan.
Chief Executive Pascal Soriot said on Friday the performance was in line with his expectations, adding that the company's latest arrivals - Imfinzi for cancer and Fasenra for severe asthma - had both got off to a strong start.
China sales, up 31 percent at more than $1 billion, also continued to be a bright spot and Soriot said the hit from Crestor patent expiries would decline materially in the second half.
"The headwinds that we are experiencing from patent expiries will be very much behind us by the end of this year," he said.
Still, the shares fell more than 2 percent as investors focused on the profit miss and the battle AstraZeneca faces as it strives to replace former blockbuster medicines.
The drugmaker has suffered the industry's biggest patent cliff since 2012, wiping out more than half of its sales, although analysts are now forecasting that it will show good growth in the years ahead as new drugs deliver.
While sales of some of these products are small at present, Deutsche Bank (DE:DBKGn) analyst Richard Parkes said Imfinzi and Fasenra had beaten expectations by 39 percent and 103 percent respectively, auguring well for the future.
Barclays (LON:BARC) analysts agreed. "Despite the headline miss we actually regard this as a positive set of numbers," they wrote in a note to clients.
IMMUNOTHERAPY FIGHT
Imfinzi, AstraZeneca's key bet in lung cancer immunotherapy, has stolen a march over rival drugs from Merck & Co (N:MRK), Bristol-Myers Squibb (N:BMY) and Roche (S:ROG) in treating certain mid-stage patients, although it lags elsewhere.
The group's total product sales in the three months rose a modest 3 percent, helped by a weaker dollar, but were down 2 percent in constant currencies, which is the benchmark AstraZeneca uses for measuring its return to growth this year.
Total revenue fell 4 percent in dollar terms to $5.18 billion, reflecting investment in new drug launches and a lack of divestments compared with a year earlier. Core earnings per share, which exclude some items, slumped 51 percent to 48 cents.
Analysts, on average, had forecast earnings of 60 cents on revenue of $5.28 billion, Thomson Reuters data showed. For the year, the company continues to predict EPS of $3.30 to $3.50.
Soriot, who saw off a 2014 takeover bid from Pfizer (N:PFE) in part by promising annual sales of $45 billion by 2023, has presided over a volatile period at AstraZeneca.
AstraZeneca shares suffered their biggest ever daily fall last July on disappointing initial results from a lung cancer immunotherapy trial dubbed Mystic. The stock has since rallied, helped by good news from two other studies.
More data from the Mystic trial is due in the second half of this year.
Despite the recovery in AstraZeneca's shares in recent months, some investors are unhappy at the bonuses Soriot has been paid and the company could face a revolt over executive pay at its annual meeting later on Friday.
"We are in ongoing discussion with the shareholders to address their concerns," Soriot said.