Investments by AstraZeneca Gobble Up Profit
AstraZeneca announced that its core profit dropped during the first quarter even while its revenue increased, as it invested heavily in developing a series of new drugs that it is betting on for much needed growth.
The drug maker, based in the UK, said its core operating profit dropped by over 12% to just over $1.6 billion from last year’s $1.8 billion during the same period. Revenue was up over 1% to end the quarter at $6.13 billion compared to last year’s $6.06 billion.
The strong U.S. dollar also cut into the reported figures of the company, stripping out that, the operating profit was down 8%, while revenue was up 5%.
That was due in part to higher spending on research, which was up 15% to over $1.4 billion, although it reflected as well a drop in its income from items like royalty payments and disposals.
Net profit was up 17% to just over $646 million from last year’s $550 million during the same period due to lower charges for amortization.
Astra has invested furiously in its new drugs pipeline to return the business to growth after a succession of expirations in patents on blockbuster drugs such as Crestor as it is expected to face huge competition from copycats that are less expensive.
The company also is reinforcing its pipeline through gobbling up biotech businesses. Astra said some of the overall increase in its research spending was from the absorption cost for two of its most recent acquisitions – Acerta Pharma and ZS Pharma.
It has bet that the new drugs will not replace just lost revenue, but will propel the business up the rankings of pharmaceuticals. CEO Pascal Soriot told his investors that the company, which had 2015 sales of $25 billion, could generate revenue of as much as $45 billion by 2023.
In comparison, the three largest drug makers in the world – Pfizer, Novartis and Roche – recorded sales of close to $50 billion during 2015.
The promise by the CEO was a key part of his defense against the unsolicited and failed bid for a takeover by Pfizer back in 2014.