AstraZeneca plc Has a Rocky First-Quarter: Here's What You Need to Know

British pharma giant AstraZeneca reported its first-quarter earnings this morning, beating on both core earnings per share (adjusted basis) and revenue. Specifically, the company reported a core EPS of $1.08, topping consensus by $0.03. On the revenue side, Astra generated $6.06 billion in the first quarter, whereas the Street was expecting a slightly lower figure of $5.95 billion.

Astra's earnings and revenue are nevertheless down significantly compared to a year ago, reflecting the loss of exclusivity for top-selling drugs like acid reflux medicationNexium, as well as the impact of a strong dollar on foreign currency exchange rates.

On a nonadjusted basis, for instance, revenue dropped by 6% and earnings by 7% during the three-month period, relative to a year ago. Core operating profit also dipped by 8% in the first quarter.

Given the company's rocky quarter, let's consider both the areas of concern and potential bright spots going forward for investors.

Areas of concernAstra has been struggling with falling revenue due to the patent cliff, and the first quarter of 2015 largely delivered more of the same. Nexium sales, for example, dropped by a staggering 53% to $225 million in the U.S., although some of this loss was moderately mitigated by increasing sales in emerging markets such as China.

Cholesterol drug Crestor, despite still having patent protection, continued to post declining sales during the first quarter, falling by 13% to $614 million in the U.S. European sales of the drug also fell modestly by 5%, to $243 million. But again, Astra benefited by a mild uptick in emerging-market sales, helping to stave off the effects of falling sales in these major Western markets.

The company'srespiratory syncytial virus medicine, Synagis, continued to spiral downhill, falling by 37% to $162 million in U.S. sales, compared to a year ago. This marked drop appears to reflect guidelines issued last year by theAmerican Academy of Pediatrics' Committee on Infectious Diseases, recommending a restriction on the types of patients eligible for the medicine.

Sales of some of the company's key oncology products, including Arimidex, Casodex, Faslodex, and Iressa, also pushed lower, with these declines resulting from a mixture of patent losses and newer, more effective medicines coming on the market.

Bright spotsIt's no secret that Astra is placing a huge emphasis on its foray into the immuno-oncology arena, as well as its newer cardiovascular and metabolic medicines, as a means to transverse the patent cliff. In those regards, the company is making some noteworthy progress.

Astra's heart attack medicine,Brilinta, for example, posted another strong quarter, raking in $131 million in sales, an increase of 32% compared to a year ago.

On the diabetes front, sales ofBydureon climbed significantly to $123 million for the three-month period, up 54% compared to the first quarter of 2014. And the newly launchedFarxiga/Forxiga continued its strong momentum with $76 million in sales during the quarter.

Perhaps most important, Astra noted that its closely watched immuno-oncology pipeline is developing as planned, with 31 clinical trials under way. For those new to this story, Astra believes its immuno-oncology pipeline, headlined by MEDI4736, can return the company to growth by as early as 2017. So although these assets are still early indevelopment, this pipeline is absolutely critical to Astra's prospects going forward.

Is Astra a strong buy right now?I still think the company's immuno-oncology pipeline needs to progress further before Astra can be called a strong buy. While the sales growth of newer products such as Brilinta and Farxiga is undoubtedly impressive, Crestor is set to lose patent protection in 2016, meaning revenue will probably continue to fall in the short term.

That's why I think it's probably best to remain safely on the sidelines while MEDI4736 and other potential blockbusters wind their way through the onerous clinical testing progress. After all, if the company's immuno-oncology pipeline fails to live up to the hype, Astra's share price will struggle in a big way.

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