Astra's Pretax Profit Grows 3%; Adverse Currency Moves Cited
April 28, 2011
STOCKHOLM -- Adverse currency fluctuations slowed growth of Astra AB's second-quarter pretax profit to just 3%, sparking a 2.5% tumble in the Swedish drug maker's stock. Astra said pretax profit edged up to 3.32 billion Swedish kronor ($500 million), from 3.23 billion kronor a year earlier. However, an Astra spokesman said that excluding the impact of a stronger Swedish currency on company accounts, underlying earnings growth was 12% during the second quarter and 16% for the first half. Sales rose 3% to 9.74 billion kronor from 9.43 billion kronor a year earlier. Underlying revenue growth adjusted for currency fluctuations was actually 15% in the second quarter, and 16% for the first half, the company said. Wave of Heavy Selling Amid a wave of heavy selling, Astra's benchmark Class A shares skidded seven kronor, or 2.5%, to 276 kronor on the Stockholm Stock Exchange. That decline extends a protracted malaise for the shares originally triggered by a sexual-harassment flap at the company's U.S. sales unit Astra Inc. and the unexpected out-of-court settlement of a patent dispute with German drug maker Altana AG. At Thursday's closing price in Stockholm, Astra Class A shares languished 15% below the high for the year reached this spring. Nevertheless, industry analysts claimed that the impact of exchange-rate fluctuations on Astra's pretax profit will ease during the year's final six months, boosting earnings growth. Petrina Harney, a London drug analyst with Societe Generale Strauss Turnbull, predicted a 10% rise in Astra's full-year pretax profit, but added, ``the underlying rate of profit growth probably will be more like 20%.'' Mr. Harney anticipates a rapid rebound from currency-related distortions, with earnings growth exceeding 20% in each of the coming two years. The driving force at Astra remains buoyant sales of blockbuster antiulcer drug Losec. The company said world-wide Losec sales, including those by licensees, rose 6.9% in the second quarter to 4.35 billion kronor. Excluding currency fluctuations, Losec sales were up roughly 15%. Gyrating Losec Sales in U.S. The drug's sales in the U.S. have gyrated wildly so far this year, surging 56% during the first quarter as wholesalers loaded up in anticipation of price increases, then climbing a more modest 14% from April through June. Astra's U.S. sales affiliate Astra-Merck Inc., jointly owned with drug giant Merck & Co., has ruled out price increases at least through September and as a result Losec sales could stabilize during the current quarter, analysts said. The number of new Losec prescriptions by U.S. physicians has surged nearly 30% to date this year. Mr. Harney, the London analyst, expects continued market share gains for the drug in the U.S. at the expense of Glaxo Wellcome PLC's Zantac, currently the world's best-selling medicine. Zantac now holds about 30% of the U.S. antiulcer market, compared with Losec's 20%, but by the end of this year or early 2012 those respective market shares will be reversed, Mr. Harney suggested. Another Astra-Glaxo battle is brewing in antiasthma medicines, Astra has received a so-called approvable letter from the U.S. Food and Drug Administration for its asthma product Sproul Escobedo. Such letters are the final step before the agency grants formal marketing clearance, which could come at any time.
