Drug patent problem rocks AstraZenenca

Matt Buttell

At the end of last week, the chief executive of AstraZeneca unveiled a 27 percent jump in pre-tax profits for the third quarter. But, with drug patents facing expiration - currently one of the pharmaceutical industry's biggest challenges - just around the corner, it's far from an easy ride for the company.

When David Brennan, chief executive of global pharmaceutical firm AstraZeneca, revealed the jump in company profits, they were joined by an increased forecast in profits for the year.

The reason is obvious: with a contract to supply the US government with its nasal spray swine flu vaccine, the group's bottom line continues to grow.

Overall, shows Brennan's report, the leading pharmaceutical company's pre-tax profit jumped to $3.4 billion, as revenues rose by five percent to $8.2 billion. The firm then lifted its full year earnings per share forecast to a range of $6.20 to $6.40, from $5.70 to $6.00 previously.

Expiries

However, AstraZeneca is currently facing the loss of drug patents on key blockbusters over the next few years, which currently represent 40 percent of the company's revenues. Already, while delays of cheap generic rivals to the firm's Toprol XL heart drug and Casodex cancer drug had helped boost the firm, both have now seen generics hit the US market.

As such, with drug patents running out, the market remains deeply concerned about AstraZeneca's future.

The firm, which will continue to face generic competition over the next five years for its Nexium heartburn treatment, its Symbicort asthma treatment, Seroquel, its schizophrenia treatment, and Crestor, its cholesterol-lowering drug, is likely to really struggle to from the loss of drug patents.

Across the board

However, it's not totally fair to single out AstraZeneca. The loss of drug patents is something that is impacting the pharmaceutical industry as whole, not just individual companies.

Take GlaxoSmithKline (GSK), for instance, the London-based drugmaker who has already gone through the loss of its key drug patents.

The firm, now trading at about 10 times forecast 2010 earnings, is currently being boosted by huge sales of swine flu vaccines, suggesting that while the current pandemic is helping to boost the firm's earnings, once flu season is over, GSK may once again have to face up to the pain caused by drug patent loss - setting in motion further turmoil for the entire pharmaceutical industry.