AstraZeneca to buy Actavis lung drugs as earnings fall short

Thu Feb 5, 2015 6:37am EST
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By Ben Hirschler

LONDON (Reuters) - AstraZeneca (AZN.L: Quote) said on Thursday it would buy Actavis' ACT.N branded respiratory drug business in the United States and Canada for an initial $600 million as it reported disappointing fourth-quarter earnings.

AstraZeneca, which is seeking such deals to drive growth, will also pay another $100 million after Actavis agreed to changes in ongoing collaborations between the two firms.

Britain's second-biggest drugmaker said 2015 sales would decline by a mid single-digit percent at constant exchange rates.

But adjusted or "core" earnings per share (EPS) are forecast to increase by a low single-digit percent this year, due to lower spending and plans to find partners on certain projects.

"We'll behave as a biotech company would when it comes to products that are not core," Chief Executive Pascal Soriot told reporters, citing a recent Alzheimer's deal with Eli Lilly (LLY.N: Quote) as a model for future cost-sharing.

The weak quarterly results knocked the shares back 1.9 percent by 1110 GMT (6:10 a.m. EST).

Citi analyst Andrew Baum said AstraZeneca appeared to have "kitchen-sinked" the quarter, or taken a deliberate hit to earnings by bringing forward some drug development costs. Deutsche's Mark Clark said this should help secure 2015 profits.

The group, which fended off a $118 billion bid by Pfizer (PFE.N: Quote) last year, saw sales in the fourth quarter fall 2 percent to $6.68 billion, generating core earnings down 38 percent at 76 cents a share.   Continued...

A sign is seen at an AstraZeneca site in Macclesfield, central England May 19, 2014. REUTERS/Phil Noble