AstraZeneca’s half year profits fall by 38%

Posted on 27 Jul 2012

Profit before tax fell from £3.9bn to £2.4bn for the first six months of 2012 at drugs manufacturer AstraZeneca, a 38% drop.

AstraZeneca put the results down to the loss of exclusivity on several key brands, losing market share as competitors flood the market with cheap products. It has also been affected by the diminishing spend by Western Governments, which have sought to cut prices.

Half year revenue fell by 16% from £10.6bn in 2011 to £8.9bn 2012 as patent protection ended on a number of key products. Loss of exclusivity on several key brands accounted for 15 percentage points of the revenue decline.

Continued disruptions at its manufacturing site in Sweden, caused by the implementation of an enterprise resource planning IT system in our plant, negatively impacted on revenue by around two per cent. AstraZeneca said that the underlying problems have now been largely resolved, and production is now responding to ongoing demand, including filling back orders and restoring normal inventories.

Revenue in Western Europe fell by 20%.  In addition to the loss of exclusivity for schizophrenia drug Seroquel IR, generic competition also reduced revenues for Atacand, which is used to treat high pressure, and stomach acid treatment Nexium in Western Europe.

Many of the company’s products sold in the UK are manufactured in Macclesfield. A spokesperson said that there are a number of products at Macclesfield losing patents, which will affect output at the site. The company announced in February that over 7,000 jobs are set to be cut worldwide by 2014, on top of the  the redundancies come on top of the 21,600 jobs that have been cut since 2007.

However, AstraZeneca’s Fluenz nasal spray is set to be rolled out throughout the UK to extend the country’s flu vaccination programme, with all children between the age of two and 17 being treated on the NHS.

The policy was to only vaccinate high-risk people – the government hopes that by immunising healthy children, it can help reduce overall flu deaths and hospitalisations.

AstraZeneca will make the product at its site in Speke, Merseyside, with packaging being produced in the US. The company will not begin the contract until September 2014 as it doesn’t have the capacity in place for the £100m programme set to be involve up to nine million children when fully rolled out.

The company has embarked on an acquisition strategy. Simon Lowth, interim CEO, commented: “Building on the collaboration with Amgen and the acquisition of Ardea, we continued to bolster our pipeline and portfolio through an exciting opportunity to expand our diabetes alliance with Bristol-Myers Squibb.”