A BIG drop in spending on research and development and disappointing sales of its top five drugs took the shine off third-quarter results from AstraZeneca (AZ) yesterday.

The Anglo-Swedish drug maker reported a 23 per cent jump in pre-tax profits to $1.7 billion (£952 million) in the three months to September 30 and tightened its full-year earnings guidance to the top end of analysts’ expectations. However, shares in the group, Britain’s second-largest drugs developer, fell 89p to £25.00 after it admitted that spending on new medicines had fallen by 4 per cent to just $781 million.

There was also disappointment in the City that total sales, up 9 per cent on constant exchange rates to $5.7 billion, fell short of City estimates by more than $200 million.

Jon Symonds, chief financial officer, attributed the fall in R&D expenditure to “genuine improvements in productivity”. He said that AZ’s scientists were more disciplined in using funding and were arranging more patient trials overseas to keep costs down. However, Mr Symonds conceded that many of the company’s drugs were at an early stage of development and thus cheaper to develop.

AZ underscored the lack of advanced candidates in its drug pipeline as it confirmed having stopped work in the quarter on two more treatments, one for heart arrhythmia and one for incontinence, after disappointing results in patient trials.

Analysts expressed concern yesterday that AZ’s increasing reliance on its top five best- sellers may leave it open to the threat of generic competition. Sales of AZ’s top five drugs leapt 23 per cent to $2.7 billion in the period. However, two of those drugs, Nexium, a stomach ulcer treatment, and Seroquel, a schizophrenia drug, are under legal threat from generic manufacturers looking to make cheaper versions of them. Sales of the two drugs accounted for more than a third of group turnover in the third quarter.

Mr Symonds said the generic attacks on Nexium and Seroquel had been expected, and that AZ had been working on its defence strategy for a considerable time. “We are very confident in our intellectual property and we will enforce it as vigorously and aggressively as possible,” he said.

Mr Symonds, who was vague about his future with AZ after missing out to succeed Sir Tom McKillop as chief executive in July, said that he continued to enjoy his work. “I am as enthusiastic about AZ as I have ever been and I will continue to do everything I can to ensure the company’s long-term success,” he said.

AZ’S DRUGS: THE FIVE TOP SELLERS

July-September 2005

Nexium (stomach ulcers) $1.12bn +18%

Seroquel (neurology) $706m +32%

Crestor (anti-cholesterol) $325m +23%

Armidex (cancer) $303m +36%

Symbicort (asthma) $240m +28%

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