AstraZeneca saw revenue fall by 11% in the first quarter of 2012 after generic competition hit the company hard.

Sales amounted to $7.349 billion after several key brands lost exclusivity, which accounted for an 8% decline in revenue. Reported operating profit, profit before tax and earnings per share were also down by more than a third.

David Brennan, Chief Executive Officer, says the “anticipated impact” of generic competition “has made for a difficult start to the year”.

Revenues were down in the US (12%), Western Europe (21%) and in Established Rest of the World (6%) and Emerging Rest of the World (1%); however, emerging markets did see a 1% increase.

In the US, revenue was down from $3.3bn in Q1 2011 to $2.9bn in the same period this year. Generic competition on Seroquel IR accounted for $223 million of the $384m loss. Growth was recorded for Onglyza, Seroquel XR and Symbicort. However, this was offset by a decline in sales of Nexium and a loss of protection for Toprol-XL, Arimidex and Merrem.

Sales were down further in Western Europe where generic competition for Nexium, Arimidex and Merrem accounted for nearly 60% of lost revenue. In Japan sales were down by a tenth, and in Canada by 8%.

An increase in revenue in China by 13% helped sales increase in emerging markets as AZ again faced the loss of patent protection for Crestor and Seroquel in Brazil and government interventions in price in Turkey.

AZ also lost $702 million in restructuring costs in Q1 as it undertook the third phase of the $2.1bn efficiency programme it revealed in February 2012. It anticipates that total restructuring costs will be absorbed this year in order to save $1.6bn by the end of 2014.

The disappointing results were published on the same day that David Brennan revealed plans to retire from his position on 1 June 2012.

Ana Nicholls, Analyst, Economist Intelligence Unit, says his decision to stand down is no real surprise. “Investors have long been dissatisfied with AstraZeneca’s efforts to cope with these challenges, despite its efforts to keep them onside,” she commented.

“Managers are aware they also need to step up their expansion into emerging markets that hold better growth prospects. Given this, and AstraZeneca’s fairly health cash pile, the company is under pressure to make acquisitions to help sustain growth – it is Mr Brennan’s failure to do this that has forced him into retirement.”

As a result of the Q1 figures, AstraZeneca readjusted its 2012 outlook and expects the decline in revenue will be in the range of the low to mid-teens.

AstraZeneca has had its lawsuit against the FDA dismissed without prejudice by the US District Court for the District of Columbia.

AZ issued the lawsuit after the US health regulator denied its Citizen Petition requesting the FDA withhold marketing authorisation on generic alternatives of Seroquel due to labelling rights.

Despite the preliminary injunction being dismissed, AZ said it “continues to believe strongly in the merits of its position” and is now “evaluating its options”.

The setback is AZ’s second in a matter of days after the UK High Court ruled its patent on an extended-release version of Seroquel was invalid.

The FDA denied a Citizen Petition filed by the Anglo-Swedish pharmaceutical firm on 7 March 2012. It had initially requested in September 2011 that generic versions of the blockbuster brand should not be allowed to enter the market until 2 December 2012.

AZ argued that data on label warnings was under exclusivity until the start of December and sought an injunction preventing the FDA granting marketing approval of copycats until then, or, alternatively, until a federal court had the opportunity to review the FDA’s action on pending generic marketing applications.

Generic competition cost AZ, it calculates, in the region of $2 billion in 2011. It had hoped to earn approximately $650m if an injunction had been obtained.

AstraZenca’s lawsuit against the US FDA over its decision not to block the entry of generic versions of Seroquel and Seroquel XR (quetiapine fumarate) has been called a gamble.

AZ claims the FDA cannot approve any generic versions of the blockbuster brands that lack specific label safety warnings – which the pharma company holds exclusive rights to.

But Ana Nicholls, Healthcare Analyst at the Economist Intelligence Unit, says the move could backfire and end up damaging AZ’s relationship with the US health regulator.

The FDA denied a Citizen Petition filed by the pharmaceutical company on March 7^th. AZ requested in September 2011 that generic versions should not be allowed to enter the market until December 2^nd 2012, when data exclusivity expires.

But the Agency’s denial of the Petition has led to AZ saying it will “vigorously defend its legal rights”.

It is now seeking an injunction preventing the FDA from granting final marketing approval of generic versions until the start of December or, alternatively, until a federal court has had the opportunity to review the FDA’s action regarding the pending generic marketing applications.

Generic competition cost the company almost $2bn in revenue last year, it calculates. Seroquel generated sales in the US worth $3.3bn in 2011 and could earn additional revenue of $650 million if AZ gets its way.

If the lawsuit is successful, Ana Nicholls predicts the move may be used by other pharmaceutical companies looking to protect or extend patent exclusivity. “If AZ does succeed in its argument over labelling requirements and data exclusivity rights, then this might give it (and other companies) another way of extending protection for drugs that are coming off patent,” she said.

“Other companies have tried different tactics – Pfizer, for example, struck exclusivity deals with pharmacy benefits managers to protect sales of Lipitor after its US patent expired late last year.

“But with the mood in the US firmly against attempts by patented drug-makers to block generic competition, the likelihood of AZ winning its case seems remote, raising the question of how much its lawsuit may damage its relationship with the FDA.”

The patent covering the active ingredient in Seroquel and Seroquel XR expired in September 2011, with paediatric exclusivity expiring on 26 March 2012. Seroquel XR is covered by a formulation patent that expires in May 2017, with paediatric exclusivity expiring in November 2017.

Last year, AstraZeneca agreed a licensing deal with generic firms Handa and Accord to enter a generic version of Seroquel XR in the US market on November 1^st 2016, or earlier under certain circumstances.