AstraZeneca (LON:AZN) surprised investors on Thursday with an improved profit forecast, lifting its shares despite a warning about competition for its Crestor drug.
The company said total annual revenue would match last year's rather than declining in low single-digit percentage terms against a year ago, as was previously thought.
It expects core earnings per share to rise in mid-high single digit percentage terms, instead of earlier guidance pointing to a low single-digit percentage increase versus the prior year.
AstraZeneca is seeing competition from producers of copy-cat versions of its drugs such as stomach upset treatment Nexium, which lost exclusivity in February.
The recent entry into the market of three generic versions of Nexium during the quarter have hit its sales, which fell 24% to US$641mln in the third quarter.
AstraZeneca boss Pascal Soriot warned that there was similar competition to come in the US next year for its anti-cholesterol drug Crestor.
He said: "2016 will be a pivotal year in our strategic journey as we face the impact of loss of exclusivity to Crestor in the US."
But Soriot struck a positive note, saying its growth drugs and upcoming product launches would combine with cost-cutting to help the group overcome short-term hurdles.
"I'm pleased with our continued progress as we focus on executing our plans across our growth platforms and pipeline," he said.
Analysts also flagged up the slowdown in China and foreign exchange volatility as challenges for the group.
AstraZeneca said it had achieved a 17% rise in third quarter sales to US$1.9bn in China against an 11% rise this time last year.
It said total revenue at actual exchange rates declined 8% in the nine-month period, reflecting the particular weakness of key trading currencies against the US dollar.
The company said that as of the end of September, it had hedged over 90% of forecast short-term currency exposure arising between the booking and settlement dates on non-local currency purchases and product sales.
Shares in AstraZeneca rose 177.5p or 4.3% to 4305p in lunchtime London trading, taking it to the top of the leader board.
Analysts at Liberum Capital said the better revenue and profit guidance probably reflected a lower-than-expected decline in Nexium sales.
They suggested heart drug Brilinta could become a new growth driver following a 73% rise in US sales.
The analysts added in a note: "The growth platforms grew 10% and account for more than half of the business which bodes well for the post-Crestor era."
Deutsche Bank had said before the results that the market would focus on key growth drivers.
"Although Symbicort continues to post double-digit US prescription growth, increasing pricing head winds are likely to result in modest overall sales declines on a constant exchange rates (CER) basis," Deutsche said.
AstraZeneca said CER sales of the asthma inhaler fell 4% in the quarter, by 12% on an actual basis and by 2% to US$2.5bn at CER in the year to date.
In the US, the year-to-date decline to US$1.1bn was limited to 1%. In Europe, sales of the drug declined by 13% to US$825mln with a modest volume decline and a significant price decline reflecting increased competition from recently-launched analogue medicines.
But in emerging markets, Symbicort sales rose 33% to US$296mln with China sales growing by 50% to US$95mln, primarily reflecting volume growth.
"The medicine continues to be competitive," Astra said in its results statement.