1st Quarter Results (2 of 2)
AstraZeneca PLC
24 April 2008
Consolidated Income Statement
2008 2007
For the quarter ended 31 March $m $m
Sales 7,677 6,966
Cost of sales (1,502) (1,486)
Distribution costs (66) (61)
Research and development (1,236) (1,170)
Selling, general and administrative costs (2,737) (2,217)
Other operating income and expense 121 138
Operating profit 2,257 2,170
Finance income 258 247
Finance expense (372) (150)
Profit before tax 2,143 2,267
Taxation (638) (703)
Profit for the period 1,505 1,564
Attributable to:
Equity holders of the Company 1,503 1,560
Minority interests 2 4
1,505 1,564
Basic earnings per $0.25 Ordinary Share $1.03 $1.02
Diluted earnings per $0.25 Ordinary Share $1.03 $1.02
Weighted average number of Ordinary Shares in issue (millions) 1,457 1,527
Diluted average number of Ordinary Shares in issue (millions) 1,457 1,531
Consolidated Balance Sheet
As at 31 Mar As at 31 Dec As at 31 Mar
2008 2007 2007
$m $m $m
ASSETS
Non-current assets
Property, plant and equipment 8,486 8,298 7,420
Goodwill 9,906 9,884 1,102
Intangible assets 13,778 11,467 3,345
Other investments 197 182 116
Deferred tax assets 1,400 1,044 1,296
33,767 30,875 13,279
Current assets
Inventories 2,169 2,119 2,294
Trade and other receivables 7,054 6,668 6,238
Other investments 330 177 849
Income tax receivable 2,218 2,251 1,338
Cash and cash equivalents 2,920 5,867 5,567
14,691 17,082 16,286
Total assets 48,458 47,957 29,565
LIABILITIES
Current liabilities
Interest bearing loans and borrowings (3,886) (4,280) (59)
Trade and other payables (7,194) (6,968) (6,913)
Provisions (531) (387) (99)
Income tax payable (4,071) (3,552) (3,278)
(15,682) (15,187) (10,349)
Non-current liabilities
Interest bearing loans and borrowings (11,116) (10,876) (1,087)
Deferred tax liabilities (4,322) (4,119) (1,695)
Retirement benefit obligations (1,755) (1,998) (1,772)
Provisions (490) (633) (384)
Other payables (226) (229) (256)
(17,909) (17,855) (5,194)
Total liabilities (33,591) (33,042) (15,543)
Net assets 14,867 14,915 14,022
EQUITY
Capital and reserves attributable to equity
holders of the Company
Share capital 364 364 378
Share premium account 1,889 1,888 1,704
Other reserves 1,882 1,902 1,884
Retained earnings 10,585 10,624 9,941
14,720 14,778 13,907
Minority equity interests 147 137 115
Total equity 14,867 14,915 14,022
Consolidated Cash Flow Statement
2008 2007
For the quarter ended 31 March $m $m
Cash flows from operating activities
Profit before taxation 2,143 2,267
Finance income and expense 114 (97)
Depreciation, amortisation and impairment 702 370
Increase in working capital (59) (61)
Other non-cash movements 100 88
Cash generated from operations 3,000 2,567
Interest paid (258) (2)
Tax paid (351) (378)
Net cash inflow from operating activities 2,391 2,187
Cash flows from investing activities
Acquisition of business operations - (143)
Movement in short term investments and fixed deposits (31) (193)
Purchase of property, plant and equipment (249) (222)
Disposal of property, plant and equipment 14 13
Purchase of intangible assets (2,689) (183)
Purchase of non-current asset investments (29) -
Interest received 61 113
Dividends paid by subsidiaries to minority interest (14) (1)
Net cash outflow from investing activities (2,937) (616)
Net cash (outflow)/inflow before financing activities (546) 1,571
Cash flows from financing activities
Proceeds from issue of share capital 1 33
Repurchase of shares - (1,184)
Dividends paid (2,007) (1,878)
Movement in short term borrowings (375) (10)
Net cash outflow from financing activities (2,381) (3,039)
Net decrease in cash and cash equivalents in the period (2,927) (1,468)
Cash and cash equivalents at the beginning of the period 5,727 6,989
Exchange rate effects 1 (1)
Cash and cash equivalents at the end of the period 2,801 5,520
Cash and cash equivalents consists of:
Cash and cash equivalents 2,920 5,567
Overdrafts (119) (47)
2,801 5,520
Consolidated Statement of Recognised Income and Expense
2008 2007
For the quarter ended 31 March $m $m
Profit for the period 1,505 1,564
Foreign exchange and other adjustments on consolidation 120 (22)
Available for sale losses taken to equity (14) (2)
Actuarial gain for the period 290 84
Tax on items taken directly to reserves (26) (16)
370 44
Total recognised income and expense for the period 1,875 1,608
Attributable to:
Equity holders of the Company 1,865 1,605
Minority interests 10 3
1,875 1,608
Notes to the Interim Financial Statements
1 BASIS OF PREPARATION AND ACCOUNTING POLICIES
These unaudited financial statements for the quarter ended 31 March 2008 have
been prepared in accordance with International Accounting Standards and
International Financial Reporting Standards (collectively 'IFRS') as adopted by
the European Union (EU) and as issued by the International Accounting Standards
Board. Details of the accounting policies applied are those set out in
AstraZeneca PLC's Annual Report and Form 20-F Information 2007.
The information contained in Note 5 updates the disclosures concerning legal
proceedings and contingent liabilities in the Company's Annual Report and Form
20-F Information 2007.
These interim financial statements do not constitute statutory accounts of the
Group within the meaning of Section 240 of the Companies Act 1985. Statutory
accounts for the year ended 31 December 2007 will be filed with the Registrar of
Companies following the Company's Annual General Meeting. The auditors' report
on those accounts was unqualified and did not contain any statement under
Section 237 of the Companies Act 1985.
2 NET DEBT
The table below provides an analysis of net debt and a reconciliation of net
cash flow to the movement in net debt.
At 1 Jan Cash Non-cash Exchange At 31Mar
2008 flow movements movements 2008
$m $m $m $m $m
Loans due after 1 year (10,876) - (81) (159) (11,116)
Current instalments of loans - - - - -
Total loans (10,876) - (81) (159) (11,116)
Other investments - current 177 31 122 - 330
Cash and cash equivalents 5,867 (2,950) - 3 2,920
Overdrafts (140) 23 - (2) (119)
Short term borrowings (4,140) 375 - (2) (3,767)
1,764 (2,521) 122 (1) (636)
Net debt (9,112) (2,521) 41 (160) (11,752)
Non-cash movements in the period include fair value adjustments under IAS 39.
3 RECONCILIATION OF REPORTED TO CORE FINANCIAL MEASURES
For the quarter ended 31 March 2007
Restructuring
and synergy MedImmune Merck
Reported costs Amortisation* Amortisation Core
Sales 6,966 - - - 6,966
Cost of sales (1,486) 82 - - (1,404)
Gross Margin 5,480 82 - - 5,562
Distribution (61) - - - (61)
R&D (1,170) - - - (1,170)
SG&A (2,217) - - 22 (2,195)
Other income 138 - - - 138
Operating Profit 2,170 82 - 22 2,274
Net finance income 97 - - - 97
Profit before Tax 2,267 82 - 22 2,371
Taxation (703) (25) - - (728)
Profit after Tax 1,564 57 - 22 1,643
Minority Interests (4) - - - (4)
Net Profit 1,560 57 - 22 1,639
Weighted Average Shares 1,527 1,527 - 1,527 1,527
Earnings per Share 1.02 0.04 - 0.01 1.07
* MedImmune amortisation commenced in Q2 2007
For the quarter ended 30 June 2007
Restructuring
and synergy MedImmune Merck
Reported costs Amortisation Amortisation Core
Sales 7,273 - - - 7,273
Cost of sales (1,668) 199 - - (1,469)
Gross Margin 5,605 199 - - 5,804
Distribution (61) - - - (61)
R&D (1,225) 29 - - (1,196)
SG&A (2,605) 148 35 25 (2,397)
Other income 259 - - - 259
Operating Profit 1,973 376 35 25 2,409
Net finance income 18 - - - 18
Profit before Tax 1,991 376 35 25 2,427
Taxation (554) (105) (10) - (668)
Profit after Tax 1,437 271 25 25 1,759
Minority Interests (11) - - - (11)
Net Profit 1,426 271 25 25 1,748
Weighted Average Shares 1,503 1,503 1,503 1,503 1,503
Earnings per Share 0.95 0.18 0.02 0.02 1.17
For the quarter ended 30 September 2007
Restructuring
and synergy MedImmune Merck
Reported costs Amortisation Amortisation Core
Sales 7,150 - - - 7,150
Cost of sales (1,444) 39 - - (1,405)
Gross Margin 5,706 39 - - 5,745
Distribution (59) - - - (59)
R&D (1,335) 8 - - (1,327)
SG&A (2,487) 99 105 25 (2,258)
Other income 197 - - - 197
Operating Profit 2,022 146 105 25 2,298
Net finance expense (134) - - - (134)
Profit before Tax 1,888 146 105 25 2,164
Taxation (537) (42) (30) - (608)
Profit after Tax 1,351 104 75 25 1,556
Minority Interests (8) - - - (8)
Net Profit 1,343 104 75 25 1,548
Weighted Average Shares 1,486 1,486 1,486 1,486 1,486
Earnings per Share 0.91 0.06 0.05 0.02 1.04
For the quarter ended 31 December 2007
Restructuring
and synergy MedImmune Merck
Reported costs Amortisation Amortisation Core
Sales 8,170 - - - 8,170
Cost of sales (1,821) 95 - - (1,726)
Gross Margin 6,349 95 - - 6,444
Distribution (67) - - - (67)
R&D (1,432) 36 - - (1,396)
SG&A (3,055) 231 115 24 (2,685)
Other income 134 - - - 134
Operating Profit 1,929 362 115 24 2,430
Net finance expense (92) - - - (92)
Profit before Tax 1,837 362 115 24 2,338
Taxation (562) (111) (35) - (708)
Profit after Tax 1,275 251 80 24 1,630
Minority Interests (9) - - - (9)
Net Profit 1,266 251 80 24 1,621
Weighted Average Shares 1,464 1,464 1,464 1,464 1,464
Earnings per Share 0.86 0.18 0.05 0.01 1.10
4 RESTRUCTURING AND SYNERGY COSTS
Profit before tax for the quarter ended 31 March 2008 is stated after charging
restructuring and synergy costs of $117 million ($82 million in the first
quarter 2007). These have been charged to the income statement as follows:
1st Quarter 2008 1st Quarter 2007
$m $m
Cost of Sales 32 82
R&D 54 -
SG&A 31 -
Total 117 82
5 LEGAL PROCEEDINGS and contingent liabilities
AstraZeneca is involved in various legal proceedings considered typical to its
business, including litigation relating to employment matters, product
liability, commercial disputes, infringement of intellectual property rights,
the validity of certain patents, anti-trust, securities law and governmental
investigations. The matters discussed below constitute the more significant
developments since publication of the disclosures concerning legal proceedings
in the Company's Annual Report and Form 20-F Information 2007.
Matters disclosed in respect of the First Quarter of 2008 and April 2008.
Abraxane(R) (paclitaxel protein-bound particles for injectable suspension)
(albumin bound)
As previously disclosed, in July 2006, Elan Pharma International Limited (Elan)
filed a lawsuit in the US District Court for the District of Delaware against
Abraxis BioScience, Inc. (Abraxis). Elan essentially alleges that Abraxis
infringes two US patents in connection with the marketing, use and sale of
Abraxane(R). The US District Court for the District of Delaware has scheduled a
trial, which is to commence on 2 June 2008. AstraZeneca is party to an
agreement with Abraxis to co-promote Abraxane(R) in the US, but is not a party
to the litigation.
AtacandTM (candesartan cilexetil)
As previously disclosed, in April 2007 AstraZeneca received notice from Sandoz
Inc. (Sandoz) that Sandoz had filed an ANDA with the FDA, seeking approval to
market a generic version of AtacandTM (candesartan cilexetil) in the 4, 8, 16
and 32mg doses, prior to the expiration of US Patent No. 5534534 (the '534
patent), which expires in July 2013.
In March and April 2008, AstraZeneca (new drug application (NDA) holder) and
Takeda (patent holder) received notices from Teva Pharmaceuticals USA Inc.
(Teva) that Teva had filed an ANDA with the FDA, seeking approval to market a
generic version of AtacandTM in the 4, 8, 16 and 32mg doses, prior to the
expiration of the '534 patent. The notifications claim that the Teva products do
not infringe the '534 patent. Teva did not challenge the compound patents listed
in the FDA Orange Book with reference to AtacandTM, the later of which expires
in June 2012. As a result, Teva cannot market candesartan cilexetil until the
end of the exclusivity period afforded by these patents. AstraZeneca and Takeda
have decided not to bring an action for patent infringement at this time.
CrestorTM (rosuvastatin)
As previously reported, in December 2007, in response to notice-letters from
seven manufacturers that they had submitted ANDAs to the FDA for approval to
market CrestorTM 5, 10, 20 and 40mg rosuvastatin calcium tablets prior to the
expiration of one or more of AstraZeneca's three FDA Orange Book-listed patents,
AstraZeneca Pharmaceuticals LP, AstraZeneca UK Limited, IPR Pharmaceuticals,
Inc., and AstraZeneca's licensor, Shionogi Seiyaku Kabushiki Kaisha (Shionogi),
filed separate lawsuits in the US District Court for the District of Delaware,
against Apotex, Aurobindo, Cobalt, Mylan, Par, Sandoz and Sun for infringement
of Patent No. RE37,314 (the '314 patent) covering rosuvastatin calcium, the
active ingredient in Crestor tablets.
The seven Delaware cases proceed. Each of the seven ANDA-filers sued by
AstraZeneca in the District of Delaware for infringement of the '314 patent has
answered, counterclaimed, or otherwise responded to AstraZeneca's pleadings.
AstraZeneca has replied or responded as allowed. Among other responses, Apotex
and Aurobindo have challenged the jurisdiction of the District of Delaware. In
the event that Apotex or Aurobindo succeed in challenging jurisdiction in
Delaware, and as an alternative to having concurrent CrestorTM litigations in
multiple District Courts, AstraZeneca has contingently moved before the Judicial
Panel on Multidistrict Litigation pursuant to 28 U.S.C. section 1407 for
coordination and consolidation of all CrestorTM pre-trial matters by the
Delaware court.
Although AstraZeneca did not sue Apotex for infringement of patent no 6,316,460
covering formulations (the '460 patent), in addition to responding to
AstraZeneca's patent infringement action in Delaware, Apotex filed a declaratory
judgment lawsuit against AstraZeneca based on AstraZeneca's '460 patent in US
District Court, Middle District of Florida. The Florida case has been stayed
pending resolution of AstraZeneca's pending motion before the Judicial Panel on
Multidistrict Litigation.
In February 2008, AstraZeneca voluntarily dismissed the duplicate cases against
Mylan and Cobalt, respectively, in West Virginia and Florida. The duplicate suit
against Aurobindo in the District of New Jersey remains filed, but it has been
stayed by the Court pending resolution of AstraZeneca's pending motion before
the Judicial Panel on Multidistrict Litigation.
AstraZeneca continues to have full confidence in and will vigorously defend and
enforce its intellectual property protecting CrestorTM.
ExantaTM (ximelagatran)
As previously disclosed, four putative and essentially similar securities class
actions were filed in the US against AstraZeneca PLC, Hakan Mogren (who
currently serves as a Director of AstraZeneca PLC), Sir Tom McKillop, Jonathan
Symonds and Percy Barnevik (who are former Directors of AstraZeneca PLC) between
January and March 2005. The defendants deny the allegations made in the lawsuit
and will vigorously defend the action. The defendants filed a motion in 2006 to
dismiss the action, and the Court heard oral argument on defendants' motion on
15 April 2008.
NexiumTM (esomeprazole)
Anti trust
As previously disclosed, in December 2006 and January 2007, several lawsuits
against AstraZeneca entities, including putative class actions, were filed in
the US District Court for the District of Columbia alleging anti-trust claims of
unlawful monopolisation relating to PrilosecTM and NexiumTM.
In March 2008, the motions to dismiss these cases were granted and the US
District Court for the District of Columbia ruled that the Plaintiffs had failed
to show that AstraZeneca violated antitrust law. The Plaintiffs have not
appealed.
Patent Litigation
As previously disclosed, in October 2005, AstraZeneca received a notice from
Ranbaxy Pharmaceuticals, Inc. that Ranbaxy Laboratories Limited (together
Ranbaxy) had submitted an ANDA to the FDA for esomeprazole magnesium
delayed-release capsules, 20 and 40mg.
On 15 April 2008, it was announced that AstraZeneca had settled this litigation.
Under the settlement agreement, Ranbaxy conceded that all six patents asserted
by AstraZeneca in the patent litigation are valid and enforceable. Ranbaxy also
accepted that four of the patents would be infringed by the unlicensed sale of
Ranbaxy's proposed generic product. The settlement agreement will allow Ranbaxy
to sell its generic version of NexiumTM under a licence from AstraZeneca
starting 27 May 2014. The settlement also includes a separate out-sourcing
agreement where a portion of NexiumTM US manufacturing will move to Ranbaxy.
This agreement is in line with AstraZeneca's stated supply chain strategy. The
remaining cases are ongoing.
In March 2008, AstraZeneca received notice from Teva Parenteral Medicines (Teva)
that Teva had submitted an NDA to the FDA regarding esomeprazole for injection,
20mg/vial and 40mg/vial. The notice contains certifications of invalidity,
unenforceability, and/or non-infringement in respect of US Patent No. 5,877,192,
which is listed in the FDA Orange Book with reference to NexiumTM in intravenous
form. AstraZeneca is evaluating Teva's notice.
As previously disclosed, AstraZeneca initiated proceedings in the Federal Court
of Canada against Novopharm Limited in connection with certain patents related
to omeprazole magnesium tablets, on the basis that Novopharm was seeking a
Notice of Compliance in Canada based on a comparison with AstraZeneca's LosecTM
tablets. Two of these proceedings remained pending until April 2008 at which
time Novopharm withdrew the allegations which were the subject of these
proceedings and the proceedings were discontinued.
AstraZeneca Canada Inc. received several notices of allegation from Apotex Inc.
(Apotex) in late 2007 in respect of patents listed on the Patent Register in
Canada for NexiumTM. Apotex asserted in its notices that it filed an Abbreviated
New Drug Submission in March 2007, for 20 and 40mg esomeprazole magnesium
trihydrate tablets and alleged non-infringement and/or invalidity of numerous
patents. AstraZeneca responded by commencing seven court applications in January
2008 under the Patented Medicines (Notice of Compliance) Regulations (NOC
Regulations). On 17 January 2008, Apotex advised that its product was
erroneously described as being a trihydrate in its allegations, which
allegations Apotex asserted it was withdrawing. Apotex mailed replacement
allegations on 17 January 2008.
On 7 March 2008, AstraZeneca commenced court applications under the NOC
Regulations in response to Apotex's replacement notices of allegation seeking
declarations that the second set of allegations are not valid for the purposes
of the NOC Regulations and, in the alternative, orders prohibiting the Canadian
Minister of Health from issuing a Notice of Compliance (marketing approval) to
Apotex for 20 and 40mg esomeprazole magnesium tablets until after the expiration
of AstraZeneca's listed patents.
Apotex cannot obtain a Notice of Compliance for its esomeprazole tablets until
the earlier of the disposition of all of the court applications in Apotex's
favour or 24 months from the date on which the latest court application has been
commenced.
AstraZeneca has full confidence in and will vigorously defend and enforce its
intellectual property protecting NexiumTM.
PulmicortTM RespulesTM (budesonide inhalation suspension)
In March 2008, AstraZeneca filed a lawsuit in the US District Court for the
District of New Jersey against Breath Limited for patent infringement. The
lawsuit is the result of an abbreviated New Drug Application (ANDA) filed by
Breath with the US Food and Drug Administration (FDA) concerning Breath's intent
to market a generic version of AstraZeneca's PulmicortTM RespulesTM (budesonide
inhalation suspension) in the US prior to the expiration of AstraZeneca's
patents.
The basis for AstraZeneca's complaint is that the action by Breath of filing an
ANDA infringes certain of AstraZeneca's patents directed to PulmicortTM
RespulesTM and their use. In October 2005, AstraZeneca filed a similar lawsuit
in the US District Court for the District of New Jersey against IVAX
Pharmaceuticals, Inc. (now known as Teva Pharmaceutical Industries Ltd.) for
infringement of AstraZeneca's patents covering PulmicortTM RespulesTM.
AstraZeneca continues to have full confidence in and will vigorously defend and
enforce its intellectual property protecting PulmicortTM RespulesTM.
SeroquelTM (quetiapine fumarate)
Product Liability
As previously disclosed, AstraZeneca Pharmaceuticals LP, either alone or in
conjunction with one or more affiliates, has been sued in numerous individual
personal injury actions involving SeroquelTM. In most of these cases, the nature
of the plaintiffs' alleged injuries is not clear from the complaint and in most
cases, little or no factual information regarding the alleged injury has been
provided in the complaint. However, the plaintiffs generally contend that they
developed diabetes and/or other related injuries as a result of taking
SeroquelTM and/or other atypical antipsychotic medications.
As of 25 March 2008, AstraZeneca was defending 8,277 served or answered lawsuits
involving approximately 12,580 plaintiff groups. To date, approximately 1,949
additional cases have been dismissed by order or agreement, about 1,500 of those
with prejudice. No trial is expected until the first half of 2009.
Patent Litigation
As previously disclosed, AstraZeneca is involved in four pending patent
infringement cases against Teva and Sandoz in relation to SeroquelTM.
Fact-discovery has ended for the four consolidated ANDA lawsuits. Expert
discovery proceeds. Sandoz and Teva have each conceded that their respective
ANDA products infringe AstraZeneca's patent covering SeroquelTM. Sandoz and Teva
have each conceded the patent's validity and allege only unenforceability for
inequitable conduct.
In March 2008, the Court consolidated the three Teva actions with the Sandoz
action for all purposes, including a joint trial, which the Court scheduled to
begin on 11 August 2008.
The Court also granted leave to AstraZeneca to file a second motion for summary
judgment. AstraZeneca filed its Motion for Summary Judgment of No Inequitable
Conduct in March 2008. A hearing on AstraZeneca's motion is scheduled on 4 June
2008.
AstraZeneca continues to have full confidence in its intellectual property
protecting SeroquelTM and will vigorously defend and enforce it.
Sales and marketing practices
As previously disclosed, in February 2007, the Commonwealth of Pennsylvania
filed suit against AstraZeneca, Eli Lilly & Co. (Lilly), and Janssen
Pharmaceutica Inc. (Janssen) claiming damages incurred by the Commonwealth as a
result of alleged off-label promotion of atypical antipsychotics by the three
manufacturers. The suits against AstraZeneca and Janssen were severed from the
suit against Lilly in December 2007.
In February 2008, a similar lawsuit was filed by the Montana Attorney General.
As is the case with the Pennsylvania suit, the Montana action seeks to recover
costs associated with alleged off-label promotion as well as costs associated
with the treatment of state residents who developed diabetes as a result of
taking SeroquelTM. As of the date of this announcement, the Montana action has
not been served.
Average wholesale price class action litigation
As previously disclosed, in January 2002, AstraZeneca was named as a defendant
along with 24 other pharmaceutical manufacturers in a class action suit in
Massachusetts, brought on behalf of a putative class of plaintiffs alleged to
have overpaid for prescription drugs as a result of inflated wholesale list
prices. AstraZeneca and other manufacturers have since been sued in similar
lawsuits filed by the state Attorneys General of Pennsylvania, Nevada, Montana,
Wisconsin, Illinois, Alabama, Kentucky, Arizona, Mississippi, Hawaii, Alaska,
Idaho and Utah as well as by multiple individual counties in the state of New
York.
The average wholesale price (AWP) case filed by the Alabama Attorney General was
tried in Circuit Court in Montgomery, Alabama from 11 February to 21 February
2008. The trial resulted in a jury verdict against AstraZeneca on the State's
claims of fraudulent concealment and misrepresentation, and an award of
compensatory damages of $40 million and punitive damages of $175 million.
Because the trial court committed multiple, reversible errors over the course of
the trial, the Company believes that the verdict will likely be overturned upon
appeal to the Alabama Supreme Court. In addition to filing the appeal,
AstraZeneca will request that the trial court reduce the award of punitive
damages. By law, punitive damages are capped at three times compensatory
damages. No provision has been taken in respect of this for the first quarter
of 2008.
The allegations made in respect of the average wholesale price lawsuits
described in this section are denied and will be vigorously defended.
6 ACCOUNTING IMPACT FROM MERCK ARRANGEMENTS
Introduction
In 1982, Astra AB set up a joint venture with Merck & Co., Inc. for the purposes
of selling, marketing and distributing certain Astra products in the US. In
1998, this joint venture was restructured (the 'Restructuring'). Under the
agreements relating to the Restructuring (the 'Agreements'), a US limited
partnership was formed, in which Merck is the limited partner and AstraZeneca is
the general partner, and AstraZeneca obtained control of the joint venture's
business subject to certain limited partner and other rights held by Merck and
its affiliates. These rights provide Merck with safeguards over the activities
of the partnership and place limitations on AstraZeneca's commercial freedom to
operate. The Agreements provide for:
• Annual contingent payments.
• A payment to Merck in the event of a business combination between Astra and
a third party in order for Merck to relinquish certain claims to that
third party's products.
• Termination arrangements which, if and when triggered, cause Merck to
relinquish its interests in AstraZeneca's products and activities.
Further details are set out in the 2007 Annual Report and Form 20-F Information.
Payment made on 17 March 2008
On 17 March, under the termination arrangements included in the Agreements,
AstraZeneca made a net cash payment to Merck of approximately $2.63 billion.
This payment resulted in AstraZeneca acquiring Merck's interests in certain
AstraZeneca products including PulmicortTM, RhinocortTM, SymbicortTM and
Toprol-XLTM. Consequently AstraZeneca no longer has to pay contingent payments
on these products to Merck and has obtained the ability to fully exploit these
products and to fully exploit other opportunities in the Respiratory therapy
area that AstraZeneca was previously prevented from doing by Merck's interests
in these products. Intangible assets aggregating to $994 million have been
recognised in respect of these acquired product rights and these are being
amortised over various periods giving rise to an annual expense of approximately
$60 million per annum. Approximately $50 million of this amortisation relates
to relief from contingent payments, and will be charged to Cost of Goods Sold,
with the balance related to the Respiratory therapy area, which will be charged
to SG&A. For the purposes of calculating Core financial measures, the Company
will exclude only the amortisation expense related to therapy area intangibles
(ie that charged to SG&A) from the Core financial measures calculations.
The balance of the net payment made on 17 March represents payments on account
for the product rights that will be acquired in the event that the First Option
and the Second Option (see below) are exercised by AstraZeneca. Intangible
assets aggregating to $1,656 million have been recognised. These balances are
not subject to amortisation until each of the options is exercised and the
related products rights are acquired. Should it become probable that the First
Option will not be exercised, all the payments on account will be expensed
immediately. If after the First Option has been exercised it becomes probable
that the Second Option will not be exercised, the payments on account for the
product rights to be acquired under the Second Option will be expensed
immediately.
Further optional payments
AstraZeneca has the right in 2010 to acquire Merck's interests in all the
products still covered by the Agreements other than PrilosecTM and NexiumTM for
$647 million ('the First Option'). These products comprise marketed products
(EntocortTM, AtacandTM, PlendilTM, LexxelTM) and products still in development
(including AZD6140, AZD3355, AZD0328 and AZD2327). If the First Option is
exercised, AstraZeneca will no longer have to pay contingent payments on these
products to Merck and will obtain the ability to fully exploit these products
and to fully exploit other opportunities in the Cardiovascular and Neuroscience
therapy areas that AstraZeneca was previously prevented from doing by Merck's
interests in these products. If the First Option is exercised, this will give
rise to an additional amortisation expense in the range of $15 to $50 million
per annum charged to COGS, the precise amount dependent upon the launch status
of the covered pipeline compounds, and an additional charge to SG&A of around
$60 million.
Provided that the First Option is exercised, AstraZeneca may exercise a further
option ('the Second Option') two years later (or in 2017, or if combined annual
sales of the two products fall below a minimum amount) which will end the
contingent payments in respect of NexiumTM and PrilosecTM and effectively end
AstraZeneca's relationship with and obligations to Merck (other than some
residual manufacturing arrangements). The exercise price for the Second Option
is the net present value of the future annual contingent payments on PrilosecTM
and NexiumTM as determined at the time of exercise. If the Second Option is
exercised then amortisation related to the ability to exploit opportunities in
the Gastrointestinal therapy area will commence, in the amount of $15 million
per annum (charged to SG&A), as well as an as yet indeterminable amount of
amortisation related to relief from contingent payments.
The intangible assets relating to purchased product rights and the intangible
assets relating to payments on account will be subject to impairment testing and
would be partially or wholly impaired if a product is withdrawn or if activity
in any of the affected therapy areas is significantly curtailed.
7 FIRST QUARTER TERRITORIAL SALES ANALYSIS
% Growth
1st Quarter 1st Quarter Constant
2008 2007 Actual Currency
$m $m
US 3,401 3,234 5 5
Canada 322 254 27 9
North America 3,723 3,488 7 5
Western Europe** 2,405 2,200 9 (1)
Japan 378 331 14 4
Other Established ROW 190 133 43 26
Established ROW* 2,973 2,664 12 1
Emerging Europe 287 246 17 2
China 133 92 45 35
Emerging Asia Pacific 204 169 21 15
Other Emerging ROW 357 307 16 9
Emerging ROW 981 814 21 11
Total Sales 7,677 6,966 10 4
* Established ROW comprises Western Europe (including France, UK, Germany,
Italy, Sweden and others), Japan, Australia and New Zealand.
** For the first quarter, Western Europe sales growth excluding SynagisTM would
be 7 percent on an actual basis and -4 percent on a constant currency basis.
8 FIRST QUARTER PRODUCT SALES ANALYSIS
World US
1st 1st Constant 1st
Quarter Quarter Actual Currency Quarter Actual
2008 2007 Growth Growth 2008 Growth
$m $m % % $m %
Gastrointestinal:
Nexium 1,238 1,308 (5) (9) 736 (15)
Losec/Prilosec 252 279 (10) (16) 47 (13)
Others 20 20 - (5) 6 (14)
Total Gastrointestinal 1,510 1,607 (6) (10) 789 (15)
Cardiovascular:
Crestor 772 628 23 16 353 3
Seloken/Toprol-XL 190 444 (57) (60) 64 (81)
Atacand 346 296 17 7 62 (5)
Tenormin 70 71 (1) (10) 5 -
Zestril 59 80 (26) (33) 4 (50)
Plendil 66 65 2 (6) 6 (14)
Others 68 69 (1) (10) 1 -
Total Cardiovascular 1,571 1,653 (5) (11) 495 (35)
Respiratory:
Symbicort 471 354 33 21 44 n/m
Pulmicort 411 401 2 (1) 275 2
Rhinocort 80 92 (13) (16) 49 (22)
Oxis 17 23 (26) (35) - -
Accolate 18 19 (5) (5) 12 (14)
Others 43 42 2 (7) - -
Total Respiratory 1,040 931 12 5 380 10
Oncology:
Arimidex 430 401 7 2 183 13
Casodex 316 310 2 (5) 66 (10)
Zoladex 255 249 2 (6) 16 (27)
Iressa 58 52 12 4 2 (33)
Ethyol 14 - n/m n/m 14 n/m
Others 92 84 10 4 40 3
Total Oncology 1,165 1,096 6 (1) 321 7
Neuroscience:
Seroquel 1,050 923 14 10 702 7
Local anaesthetics 138 126 10 (1) 8 -
Zomig 107 107 - (7) 44 (6)
Diprivan 68 59 15 7 11 22
Others 15 12 25 17 3 50
Total Neuroscience 1,378 1,227 12 7 768 7
Infection and Other:
Synagis 519 - n/m n/m 456 n/m
Merrem 213 178 20 12 46 31
FluMist - - n/m n/m - n/m
Other Products 55 74 (26) (28) 29 (24)
Total Infection and Other 787 252 212 206 531 627
Aptium Oncology 98 98 - - 98 -
Astra Tech 128 102 25 16 19 46
Total 7,677 6,966 10 4 3,401 5
Shareholder Information
ANNOUNCEMENTS AND MEETINGS
Annual General Meeting 24 April 2008
Announcement of second quarter and half year 2008 results 31 July 2008
Announcement of third quarter and nine months 2008 30 October 2008
results
DIVIDENDS
Future dividends will normally be paid as follows:
First interim Announced in July and paid in September
Second interim Announced in January and paid in March
TRADEMARKS
The following brand names used in these interim financial statements are
trademarks of the AstraZeneca Group of companies:
Accolate Arimidex Astra Tech Atacand Casodex Crestor Diprivan Ethyol
Faslodex FluMist Iressa Lexxel Losec Merrem Nexium Nolvadex Oxis
Plendil Prilosec Pulmicort Pulmicort Flexhaler Pulmicort Respules Pulmicort
Turbuhaler Recentin Rhinocort Seloken Seroquel Seroquel XR Symbicort
Symbicort SMART Synagis Tenormin Toprol-XL Zactima Zestril Zoladex Zomig
ADDRESSES FOR CORRESPONDENCE
Registrar and Depositary Swedish Securities
Transfer Office for ADRs Registered Office Registration Centre
The AstraZeneca Registrar JPMorgan Chase Bank 15 Stanhope Gate VPC AB
Equiniti Limited JPMorgan Service Center London PO Box 7822
Aspect House PO Box 3408 W1K 1LN SE-103 97 Stockholm
Spencer Road South Hackensack UK Sweden
Lancing NJ 07606-3408
West Sussex US
BN99 6DA
UK Tel (toll free in US): Tel: +44 (0)20 7304 5000 Tel: +46 (0)8 402 9000
Tel (freephone in UK): 888 697 8018
0800 389 1580 Tel: +1 (201) 680 6630
Tel (outside UK):
+44 (0)121 415 7033
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
In order to utilise the 'safe harbour' provisions of the US Private Securities
Litigation Reform Act 1995, we are providing the following cautionary statement:
These interim financial statements contain certain forward-looking statements
about AstraZeneca. Although we believe our expectations are based on reasonable
assumptions, any forward-looking statements may be influenced by factors that
could cause actual outcomes and results to be materially different from those
predicted. We identify the forward-looking statements by using the words '
anticipates', 'believes', 'expects', 'intends' and similar expressions in such
statements. These forward-looking statements are subject to numerous risks and
uncertainties. Important factors that could cause actual results to differ
materially from those contained in forward-looking statements, certain of which
are beyond our control, include, among other things: the loss or expiration of
patents, marketing exclusivity or trade marks; the risk of substantial adverse
litigation/government investigation claims and insufficient insurance coverage;
exchange rate fluctuations; the risk that R&D will not yield new products that
achieve commercial success; the risk that strategic alliances will be
unsuccessful; the impact of competition, price controls and price reductions;
taxation risks; the risk of substantial product liability claims; the impact of
any failure by third parties to supply materials or services; the risk of
failure to manage a crisis; the risk of delay to new product launches; the
difficulties of obtaining and maintaining regulatory approvals for products; the
risk of failure to observe ongoing regulatory oversight; the risk that new
products do not perform as we expect; the risk of environmental liabilities; the
risks associated with conducting business in emerging markets; the risk of
reputational damage; and the risk of product counterfeiting.
This information is provided by RNS
The company news service from the London Stock Exchange
Friday, 22nd November 2024
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