AstraZeneca blames customer cut backs for disappointing results

The Anglo-Swedish pharmaceutical group AstraZeneca posted what analysts considered to be disappointing first-quarter sales figures yesterday, but said that its full-year earnings growth was on track to meet expectations.

The company blamed customers cutting back on stocks of drugs in the first quarter as the main reason for the numbers, which showed 10 per cent sales growth, below forecasts. The group manufacturers Nexium, the blockbuster ulcer treatment, which had faced a patent challenge from the Indian generics company Ranbaxy that was resolved in AstraZeneca's favour last week.

Analysts expected that Nexium sales growth would be slower, but were mystified why other drugs had also been de-stocked. Simon Louth, AstraZeneca's chief financial officer, said there was "no particular reason".

First-quarter, pre-tax profits were up 12 per cent to $2.65bn (£1.34bn), although this figure did not include restructuring costs associated with the buyout of the biotechnology group MedImmune. Shares in the company fell by 5 per cent on the announcement, with analysts blaming a misunderstanding of the figures. The group has said that due to beneficial movements in the dollar, earnings per share growth had increased by 5 cents.

Peter Cartwright, an analyst at Evolution, said that most investors had assumed that the growth increase had been worked out by taking a set dollar price for the whole year, when in fact it is worked out by the company on a quarterly basis. Shares had recovered to 2,120p by the close of trading, down 0.6 per cent, with investors assuming that the 5 cent figure will improve during the year.

Despite the group maintaining that it will hit annual sales targets, Simon Mather, a pharmaceutical industry watcher at WestLB, said the company would come under pressure in the next year, particularly from generics groups.

The patents of Seroquel, the company's psychiatric treatment, and Crestor, an anti-cholesterol drug, face challenges in the next 18 months. Mr Louth said he would vigorously defend its intellectual property rights.

Seroquel recorded sales of $1.05bn in the first quarter, up from $923m last year, while Crestor made $772m against $628m in 2006.

Mr Louth also refused to rule out a move away from the UK. Last week, one of AstraZeneca's rivals, Shire, said it was to re-domicile in the Republic of Ireland to take advantage of the country's 12.5 per cent corporate tax rate. UK corporate tax is charged at 28 per cent.

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