Investor discontent at Britain's second-largest pharmaceuticals giant, AstraZeneca (NYSE: AZN), has been growing for some time. The firm's drug-development pipeline, which is increasingly crucial for future profits as patents expire on current drugs and competition from generics heats up, has been slowing to a trickle.
While rivals like GlaxoSmithKline (NYSE: GSK) have been expanding their horizons in the direction of novel biotechnology, AstraZeneca has pretty much stuck to the old-fashioned search for blockbuster prescription drugs. And that business model is starting to look a bit tired these days.
Since chief executive David Brennan took the helm six years ago, the only real attempt to rectify the growing problem has been the acquisition of biotech researcher MedImmune, now widely considered an expensive flop.
And it has all come to a head today, the day of first-quarter results and the annual general meeting.
Time to go
Facing a strong challenge to his board reelection, and just a year before his 60th birthday, Mr. Brennan has announced his retirement. He'll stand down on June 1, with CFO Simon Lowth stepping in as interim chief while the search for a long-term replacement, from either within or outside the company, goes ahead.
Chairman Louis Schweitzer is to step down as well, replaced by Leif Johansson, who will head the CEO search.
But what about those Q1 figures? Well, they're not good. Pre-tax profit has fallen by 38% to $2.1 billion, with earnings per share sliding from $2.08 to $1.28.
And it's largely down to that long-expected -- and inadequately planned-for -- patent expiration, with the outgoing CEO telling us: "The anticipated impact from the loss of exclusivity on several brands ... has made for a difficult start to the year in revenue terms."
The anti-depression drug Seroquel is the main culprit; its patent expired last month. But we'll see protection ending for heartburn treatment Nexium in 2014 and, for the big one, anti-cholesterol statin Crestor, in 2016. That's going to hurt.
Profit warning
This Q1 shortfall is no short-term blip, and we have also been given what is effectively a profit warning for the full year, with EPS guidance having been revised downward from the earlier figure of $6.15 to $5.85 -- a fall of 5%.
The shares have lost 5.5% and are currently changing hands for $45.91 apiece.
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