3rd Qrt & 9 Mths Results-Pt.1

AstraZeneca PLC 25 October 2000 Part 1 AstraZeneca PLC Nine Months Results 2000 'Profit before tax up 15 per cent; EPS up 15 per cent' Financial Highlights (before Exceptional Items) ---------------------------------------------------------------------------- --------------------------------------------- Group Nine Months Nine Months Constant (incl Agrochemicals) 2000 1999* Currency USDm USDm % --------------------------------------------- Sales 13,838 13,322 +7 Operating Profit 3,365 3,052 +12 Profit before Tax 3,428 3,033 +15 Earnings per Share Group USD1.35 USD1.20 +15 Group (Statutory FRS3) USD1.25 USD0.74 --------------------------------------------- * Excluding Specialties All narrative in this section refers to growth rates at constant exchange rates (CER) - Sales up 7 per cent; Agrochemicals sales also up 7 per cent - Operating profit up 12 per cent; Agrochemicals operating profit up 29 per cent - Profit before tax of USD3,428 million, up 15 per cent - EPS up 15 per cent - Strength of US Dollar reduced reported sales by 3 per cent and operating profit by 2 per cent --------------------------------------------- Ongoing Nine Months Nine Months Constant (excl Agrochemicals) 2000 1999 Currency USDm USDm % --------------------------------------------- Sales 11,660 11,218 +7 Operating Profit 3,013 2,774 +11 Earnings per Share USD1.23 USD1.09 +15 --------------------------------------------- All narrative in this section refers to growth rates for ongoing operations at constant exchange rates (CER) - Sales up 7 per cent; US Healthcare sales up 7 per cent - Operating profit up 11 per cent - EPS up 15 per cent - Healthcare operating margin increased to 26.2 per cent - Strength of US Dollar reduced reported sales by 3 per cent and operating profit by 2 per cent - Synergy benefits of USD425 million achieved in the nine months; exceptional charge of USD222 million related to the ongoing integration and synergy programmes AstraZeneca PLC Third Quarter Results 2000 Financial Highlights (before Exceptional Items) ---------------------------------------------------------------------------- --------------------------------------------- Group 3rd Quarter 3rd Quarter Constant (incl Agrochemicals) 2000 1999* Currency USDm USDm % --------------------------------------------- Sales 4,294 4,279 +3 Operating Profit 976 949 +6 Profit before Tax 986 941 +8 Earnings per Share Group USD0.39 USD0.37 +9 Group (Statutory FRS3) USD0.37 USD0.27 --------------------------------------------- * Excluding Specialties All narrative in this section refers to growth rates at constant exchange rates (CER) - Sales up 3 per cent compared with the strong third quarter in 1999; Agrochemicals sales up 4 per cent - Operating profit up 6 per cent - Profit before tax of USD986 million, up 8 per cent - EPS up 9 per cent - Strength of US Dollar reduced reported sales and operating profit by 3 per cent --------------------------------------------- Ongoing 3rd Quarter 3rd Quarter Constant (excl Agrochemicals) 2000 1999 Currency USDm USDm % --------------------------------------------- Sales 3,797 3,787 +3 Operating Profit 967 954 +5 Earnings per Share USD0.39 USD0.37 +9 --------------------------------------------- All narrative in this section refers to growth rates for ongoing operations at constant exchange rates (CER) - Sales up 3 per cent; Healthcare sales up 3 per cent; US Healthcare sales down 1 per cent - Operating profit up 5 per cent - EPS up 9 per cent - Healthcare operating margin 25.8 per cent - Strength of US Dollar reduced reported sales by 3 per cent and operating profit by 4 per cent - Synergy benefits of USD160 million achieved in the quarter; exceptional charge of USD43 million related to the ongoing integration and synergy programmes Tom McKillop, Chief Executive Officer, said: 'We continue to make progress in restructuring the Group while maintaining business performance. Earnings per share (before exceptional items) for the Group increased in constant currency by 9 per cent in the quarter and by 15 per cent to USD1.35 for the nine months. In early October our shareholders approved the demerger of Agrochemicals to form Syngenta, and we expect to complete the transaction in mid November. Healthcare operating profit increased by 5 per cent for the quarter and by 11 per cent for the nine months in constant currency. Sales for the quarter increased by 3 per cent and by 7 per cent for the nine months. These results are consistent with the trends we presented with our results at the half year, in which we anticipated sales and profit growth would be weaker in the third quarter and stronger in the fourth quarter, principally reflecting the quarterly phasing in 1999. In addition, this quarter we have experienced volatility in US wholesaler buying patterns and this makes some individual product comparisons difficult. These are described more fully in the product discussions which follow. Prilosec grew in total prescriptions in the USA by 4.4 per cent, but its market share within the PPI segment has come under pressure from recently launched products and competitive pricing ahead of the launch of Nexium. The five important growth drivers highlighted at the half year - Atacand, Arimidex, Casodex, Seroquel, and Zomig - are up 49 per cent for the nine months, with further strong growth expected in the fourth quarter. This is a busy time for our marketing organisations throughout the world. The launch of Nexium began in the third quarter to specialists in Sweden and more generally in the UK. We have also launched in Ireland, Norway and, just last week, in Denmark and Germany. While it is still very early into the launch phase, the first four weeks of prescription data suggests that this could be the fastest ever uptake of a new product in the UK. In the USA we have received an approvable letter from the FDA and discussions to determine the label are taking place in line with normal FDA procedure. Symbicort has been approved and successfully launched in Sweden. The broad roll out of Symbicort in Europe is planned for early next year after approval through the EU mutual recognition procedure. In the USA, where our major sales force expansion programme is nearly complete, launches of Arimidex for first line treatment, Pulmicort Respules, and Atacand Plus will all take place in the fourth quarter, ahead of next year's anticipated launch of Nexium. A progress report on our strong R&D portfolio will be given at the R&D presentation in Molndal on 11/12 December. The synergy programme is on track and realised USD160 million in the third quarter, bringing the nine month total to USD425 million. The target for the full year is USD600 million. Agrochemicals sales through nine months advanced 7 per cent and operating profits by 29 per cent in constant currency. The strong dollar reduced reported sales by 3 per cent and operating profit by 2 per cent. Currency remains a factor in our current performance, and during the quarter sales and profits were reduced by 3 per cent and 4 per cent respectively. For the full year we expect currency to reduce operating profits by around USD100 million. It remains our view that the quarterly phasing of sales and profit growth will favour the fourth quarter. Although Healthcare sales in the fourth quarter of 1999 were the highest reported all last year, we anticipate double digit growth in the coming quarter. The slower growth of Prilosec in the USA, however, now makes it unlikely that we will meet our double digit sales growth target, and we expect sales growth for the full year in constant currency of around 8 per cent. The profit performance remains on track for achieving our target of good double digit growth in constant currency, with operating profit growth before exceptional items approaching the mid-teens and EPS growth slightly ahead of this.' London, 25 October 2000 Media Enquiries: Steve Brown/Lucy Williams (London) +44 20 7304 5033/5034 Staffan Ternby (Sodertalje) +46 8 553 26107 Rachel Bloom (Wilmington) +1 302 886 7858 Analyst/Investor Enquiries: Michael Olsson (London) +44 20 7304 5087 Staffan Ternby (Sodertalje) +46 8 553 26107 Ed Seage (Wilmington) +1 302 886 4065 Jorgen Winroth (Wayne) +1 609 896 4148 Healthcare --------------------------------------------------------------------------- All narrative in this section refers to the third quarter unless otherwise indicated. Growth rates are at constant currency. Sales grew by 3 per cent (2 per cent excluding Losec/Prilosec); operating profits were up 5 per cent. Gastrointestinal ---------------------------------------------------- Third Quarter CER % Nine Months CER % ---------------------------------------------------- 2000 1999 2000 1999 ---------------------------------------------------- Losec/Prilosec 1,565 1,539 +4 4,532 4,387 +6 ---------------------------------------------------- Total 1,581 1,551 +4 4,570 4,423 +6 ---------------------------------------------------- - Prilosec sales in the USA recovered from the destocking experienced last quarter and were essentially the same as last year's strong third quarter. - Prilosec share of the US anti-secretory market in the twelve months ending in August was 32.4 per cent (32.1 per cent in prior year); however, market share within the PPI declined as a result of new entrants. - Nine months Prilosec sales are broadly in line with the slowing prescription trend, reflecting competition from new entrants in the PPI market. - In Europe sales of Losec grew by 9 per cent in the quarter with good growth continuing in France and more stable market conditions in Germany. - The first launch of Nexium took place to specialist physicians in Sweden on 14 August. A broad GP launch will follow in January. Further launches to date include the UK, Norway, Ireland, Germany and Denmark. For the quarter, sales of USD4 million were recorded in Sweden and the UK. Cardiovascular ---------------------------------------------------- Third Quarter CER % Nine Months CER % ---------------------------------------------------- 2000 1999 2000 1999 ---------------------------------------------------- Zestril 299 322 -5 960 924 +6 Atacand 72 43 +76 196 116 +80 Seloken/Toprol-XL 144 152 -2 405 409 +3 Plendil 120 112 +11 353 328 +11 ---------------------------------------------------- Total 851 876 +1 2,635 2,546 +7 ---------------------------------------------------- - In the USA sales of Zestril were up 11 per cent in value over the nine months, in line with the prescription trend in the first eight months. This masks two factors at work. Continued strong performance for Zestril in the managed care segment has resulted in higher performance related rebates which have more than offset volume gains in the current quarter. However, trade shipments around the August price increase has boosted volumes to the extent that the level of trade inventories as we enter the fourth quarter foreshadows some slowing in ex-factory sales in the period. - Price reductions in the UK and generic competition in Germany contributed to the soft performance for Zestril in Europe. - Atacand continued its strong growth across all major markets, with increasing contribution from the launch of the 16 mg dose and launches of Atacand Plus. - The robust prescription trend for Toprol-XL in the US continues at around 25 per cent; however, sales comparisons in the quarter and the nine months reflect the concentration of sales in the second and third quarters last year (65 per cent of the annual total). Respiratory ---------------------------------------------------- Third Quarter CER % Nine Months CER % ---------------------------------------------------- 2000 1999 2000 1999 ---------------------------------------------------- Pulmicort 159 169 - 512 539 +1 Accolate 17 35 -48 131 109 +20 Rhinocort 51 38 +39 165 137 +25 Oxis 28 22 +41 84 63 +46 ---------------------------------------------------- Total 295 306 +2 1,024 992 +9 ---------------------------------------------------- - In the USA sales growth for Pulmicort for the quarter was muted by destocking following the August price increase. Nine months sales remain strong (up 48 per cent). The launch of Pulmicort Respules is now underway and should stimulate future growth. Sales in Europe continue to be adversely affected by competitor products. - Symbicort, the combination of Pulmicort with the bronchodilator Oxis in a single inhaler, received its first approval in Sweden. - Good growth in Rhinocort follows the successful introduction of Rhinocort Aqua in the US earlier this year. - Accolate, reflecting high levels of wholesaler stocks in the second quarter, experienced a sharp correction in the quarter; however, sales are still running ahead of the underlying prescription trend on a year-to-date basis. Oncology ---------------------------------------------------- Third Quarter CER % Nine Months CER % ---------------------------------------------------- 2000 1999 2000 1999 ---------------------------------------------------- Casodex 94 79 +22 314 245 +31 Arimidex 35 37 - 117 100 +22 Nolvadex 130 142 -8 405 429 -7 Zoladex 189 161 +19 553 492 +13 ---------------------------------------------------- Total 455 425 +9 1,411 1,284 +11 ---------------------------------------------------- - Roll out of the Arimidex first line treatment indication has already begun in Europe, with US approval received last month. Sales of Arimidex are up by 22 per cent for the nine months; for the quarter sales are out of line with the growth trend in recent quarters chiefly as a result of trade buying patterns. - Casodex had good growth for the quarter despite unwinding of high stock levels in the USA. Market share continues to advance in the USA to nearly 70 per cent of new prescriptions. Use in monotherapy continues to drive growth in the UK and Sweden, and is awaiting approval in the USA. - Inventory destocking continues to mask good underlying prescription growth for Nolvadex (tamoxifen) in the US market. Specialist/Hospital ---------------------------------------------------- Third Quarter CER % Nine Months CER % ---------------------------------------------------- 2000 1999 2000 1999 ---------------------------------------------------- Seroquel 89 66 +35 293 161 +83 Zomig 46 49 -2 178 135 +34 Merrem 44 37 +22 122 114 +13 Diprivan 109 137 -17 393 464 -12 Xylocaine 58 56 +6 175 184 -4 Marcaine 22 21 +15 67 63 +14 Astra Tech 27 27 +7 85 82 +9 Salick Health Care 45 46 -2 135 164 -18 ---------------------------------------------------- Total 592 608 - 1,940 1,903 +3 ---------------------------------------------------- - Continued strong growth of prescriptions for Seroquel in the USA (up 73 per cent in the twelve months through August) reflects increasing acceptance and the impact of a larger sales force. Sales in the quarter were affected by the phasing of sales around the August price increase. Early indicators from the launches in Germany and Italy are positive. The product was also launched in Spain in September. - Sales growth for Zomig in Europe was offset by trade destocking in the USA in the third quarter. Rapimelt formulation is experiencing good acceptance where launched. - Merrem sales have recovered following resumption of US marketing in April. - Diprivan continues to grow strongly in Japan. In the face of generic competition in the US market sales were down 28 per cent for the quarter and 24 per cent for the nine months. However, Diprivan continues to hold 60 per cent share of the total propofol market by volume. Geographic (Pharmaceuticals) ---------------------------------------------------- Third Quarter CER % Nine Months CER % ---------------------------------------------------- 2000 1999 2000 1999 ---------------------------------------------------- USA 1,921 1,937 -1 5,841 5,407 +8 Europe 1,182 1,221 +7 3,797 3,889 +6 Japan 207 164 +16 581 468 +10 RoW 419 398 +9 1,226 1,220 +1 ---------------------------------------------------- - In the USA quarterly phasing markedly affected year-on-year comparisons. We anticipate a significantly more favourable year-on-year performance in the fourth quarter. - In Europe the CER growth rate for the quarter was slightly ahead of the nine months rate of growth. - Sales in Japan, fuelled by continued strong Casodex performance as well as Diprivan, continued to grow ahead of the market. Operating Profit - Healthcare operating profit grew by 5 per cent, reaching USD975 million for the quarter, and for the nine months was up 11 per cent. The stronger dollar reduced reported profits by 3 per cent for the quarter and 2 per cent for the nine months. - The operating margin increased to 25.8 per cent from 25.4 per cent in the third quarter of 1999, reflecting the continued realisation of synergy benefits. Margin for the nine months was 26.2 per cent. After allowing for the anticipated build up of launch costs and phasing of R&D spend in the fourth quarter, we expect that the full year operating margin may come in slightly ahead of the target of 25 per cent for the year. - There has also been greater currency volatility this quarter, principally as a result of the weak Euro. These movements, together with the weakness in Sterling and the Swedish krona, reduced Ongoing operating profits by 4 per cent in the quarter and by 2 per cent for the nine months. If current exchange rates remain for the rest of the year we expect currency impact on sales and profits of 4 per cent and 3 per cent respectively. In absolute terms this anticipates a currency impact on profits of approximately USD100 million for the year. Agrochemicals ----------------------------------------------------------------------------- All growth rates in this section are at constant exchange rates. Sales grew 7 per cent in the first nine months, with third quarter growth of 4 per cent in difficult agricultural markets which are showing little improvement. Sustained operational efficiency led to a 29 per cent improvement in nine month operating profit. Currency effects decreased reported nine month sales and operating profit by 3 and 2 per cent respectively, principally due to the weaker Euro. Products ---------------------------------------------------- Third Quarter CER % Nine Months CER % ---------------------------------------------------- 2000 1999 2000 1999 ---------------------------------------------------- Non-Selective Herbicides 153 164 -4 621 533 +19 Selective Herbicides 105 100 +8 555 590 -3 Total Herbicides 258 264 +1 1,176 1,123 +7 Insecticides 89 100 -7 359 330 +12 Fungicides 135 115 +20 592 590 +5 ---------------------------------------------------- Total 497 492 +4 2,178 2,104 +7 ---------------------------------------------------- - Herbicide sales were up 1 per cent in the quarter, with US sales of the corn herbicide Surpass offsetting a decrease in non-selective herbicide sales, largely in the US and Europe. - Insecticide sales were down 7 per cent in the third quarter due to a difficult US cotton market and weak demand in Africa. - Fungicide sales increased 20 per cent with a strong Amistar performance in Europe and Latin America. Geographic ---------------------------------------------------- Third Quarter CER % Nine Months CER % ---------------------------------------------------- 2000 1999 2000 1999 ---------------------------------------------------- North America 150 151 - 765 727 +5 Europe 126 122 +15 726 755 +6 Latin America 134 137 -3 343 302 +14 RoW 87 82 +8 344 320 +7 ---------------------------------------------------- Total 497 492 +4 2,178 2,104 +7 ---------------------------------------------------- - North American sales in the third quarter were unchanged with Surpass and Amistar offsetting the reduced insecticide sales. - Europe benefited from increased sales of Amistar and selective herbicides. - Increased third quarter sales in Brazil were more than offset by weaker demand elsewhere in Latin America, principally in Argentina. - Sales in the Rest of World markets increased due to continued growth of Gramoxone in Asia Pacific. Operating Margin (pre Exceptional Items) The operating margin improved from 13.2 per cent to 16.2 per cent. The increase in sales, combined with benefits from the 1999 cost restructuring programme underpinned this improvement. Syngenta ----------------------------------------------------------------------------- At the Extraordinary General Meeting held in London on 11 October, shareholder approval was given for the declaration and payment by the AstraZeneca Board of a dividend of Syngenta shares to holders of AstraZeneca shares on the relevant record date. The approval of this dividend facilitates implementation of the previously announced proposed demerger of the Agrochemicals business and its merger with Novartis Agribusiness to form Syngenta. The Syngenta transaction was also approved by the Novartis shareholders. Completion of the transaction, which remains subject to US competition law approval, is presently anticipated to take place in mid-November. Taxation ----------------------------------------------------------------------------- The effective tax rate for the first nine months of this year was 30.8 per cent compared to 36.1 per cent last year. Excluding exceptional items, the effective rate for the nine months for the Group is 30.1 per cent (30.0 per cent last year), and for ongoing operations 29.0 per cent (29.3 per cent last year). Cash Flow ----------------------------------------------------------------------------- Cash generated from operating activities before exceptional items amounted to USD4.0 billion for the nine month period. This was used to pay the 1999 final dividend (USD0.8 billion), to fund capital expenditures of USD1.0 billion, exceptional item costs of USD0.6 billion and to pay taxes of USD0.6 billion. Net cash inflow for the nine months was USD0.9 billion before financing transactions, including the share repurchase programme. At 30 September 2000 the Group had net cash funds of USD2.6 billion. Share Repurchase Programme ----------------------------------------------------------------------------- No further share repurchases were made during the third quarter of 2000: 9.4 million shares were repurchased in the first half year at a cost of USD353 million. The total number of shares repurchased for cancellation since the start of the programme in December 1999 stands at 13.7 million at an aggregate cost of USD531 million. The total number of shares in issue (as at 30 September 2000) is 1,766 million. Fourth Quarter Milestones and Key Dates ----------------------------------------------------------------------------- 11 November Additional ZD4522 Phase II data published: American Heart Association, New Orleans 6-9 December Faslodex Phase III data published: American Breast Cancer Conference, San Antonio 11-12 December Analyst/investor visit to Molndal for presentations on Discovery, GI, CV and other novel approaches Fourth Quarter Zomig MAA nasal spray submission Merrem sNDA filed for pneumonia Tom McKillop Chief Executive Officer MORE TO FOLLOW

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