Final Results - Part 2 of 3
AstraZeneca PLC
02 February 2006
Consolidated Income Statement
As restated
For the year ended 31 December 2005 2004
$m $m
Sales 23,950 21,426
Cost of sales (5,356) (5,193)
Distribution costs (211) (177)
Research and development (3,379) (3,467)
Selling, general and administrative expenses (8,695) (8,268)
Other operating income 193 226
Operating profit 6,502 4,547
Profit on sale of interest in joint venture - 219
Finance income 665 532
Finance expense (500) (454)
Profit before tax 6,667 4,844
Taxation (1,943) (1,161)
Profit for the period 4,724 3,683
Attributable to:
Equity holders of the Company 4,706 3,664
Minority interests 18 19
4,724 3,683
Basic earnings before exceptional items per $0.25 Ordinary Share $2.91 $2.01
Basic earnings after exceptional items per $0.25 Ordinary Share $2.91 $2.18
Diluted earnings after exceptional items per $0.25 Ordinary Share $2.91 $2.18
Weighted average number of Ordinary Shares in issue (millions) 1,617 1,673
Diluted average number of Ordinary Shares in issue (millions) 1,618 1,675
Exceptional items in 2004 comprised profit on sale of interest in joint venture
($219 million) and exceptional tax credits ($67 million).
Consolidated Income Statement
As restated
For the quarter ended 31 December 2005 2004
$m $m
Sales 6,286 5,799
Cost of sales (1,388) (1,498)
Distribution costs (56) (45)
Research and development (873) (899)
Selling, general and administrative expenses (2,403) (2,138)
Other operating income 70 52
Operating profit 1,636 1,271
Finance income 181 136
Finance expense (128) (112)
Profit before tax 1,689 1,295
Taxation (462) (366)
Profit for the period 1,227 929
Attributable to:
Equity holders of the Company 1,224 923
Minority interests 3 6
1,227 929
Basic earnings before exceptional items per $0.25 Ordinary Share $0.77 $0.55
Basic earnings after exceptional items per $0.25 Ordinary Share $0.77 $0.55
Diluted earnings after exceptional items per $0.25 Ordinary Share $0.77 $0.55
Weighted average number of Ordinary Shares in issue (millions) 1,590 1,654
Diluted average number of Ordinary Shares in issue (millions) 1,592 1,656
Consolidated Balance Sheet
As restated
As at 31 December 2005 2004
$m $m
ASSETS
Non-current assets
Property, plant and equipment 6,985 8,097
Intangible assets 2,712 3,050
Other investments 256 262
Deferred tax assets 1,117 1,218
11,070 12,627
Current assets
Inventories 2,206 3,020
Trade and other receivables 4,961 4,740
Other investments 1,624 1,198
Cash and cash equivalents 4,979 4,067
13,770 13,025
Total assets 24,840 25,652
LIABILITIES
Current liabilities
Interest bearing loans and borrowings (90) (142)
Other payables (6,749) (6,445)
(6,839) (6,587)
Non-current liabilities
Interest bearing loans and borrowings (1,111) (1,127)
Deferred tax liabilities (1,112) (1,328)
Retirement benefit obligations (1,706) (1,761)
Provisions (309) (266)
Other payables (72) (86)
(4,310) (4,568)
Total liabilities (11,149) (11,155)
Net assets 13,691 14,497
EQUITY
Capital and reserves attributable to equity holders
Share capital 395 411
Share premium account 692 550
Other reserves 1,831 1,853
Retained earnings 10,679 11,590
13,597 14,404
Minority equity interests 94 93
Total equity and reserves 13,691 14,497
Consolidated Cash Flow Statement
As restated
For the year ended 31 December 2005 2004
$m $m
Cash flows from operating activities
Operating profit before taxation 6,502 4,547
Depreciation and amortisation 1,327 1,268
Decrease/(increase) in working capital 332 (67)
Other non-cash movements 220 384
Cash generated from operations 8,381 6,132
Interest paid (32) (69)
Tax paid (1,606) (1,246)
Net cash inflow from operating activities 6,743 4,817
Cash flows from investing activities
Disposal of business operations - 355
Movement in short term investments and fixed deposits (491) 1,855
Purchases of property, plant and equipment (810) (1,063)
Disposals of property, plant and equipment 87 35
Purchase of intangible assets (157) (215)
Purchase of non-current asset investments (12) (117)
Interest received 206 119
Dividends paid by subsidiaries to minority interests (5) (5)
Dividends received - 6
Net cash (outflow)/inflow from investing activities (1,182) 970
Net cash inflow before financing activities 5,561 5,787
Cash flows from financing activities
Proceeds from issue of share capital 143 102
Repurchase of shares (3,001) (2,212)
Increase in loans - 725
Dividends paid (1,717) (1,378)
Movement in short term borrowings 3 2
Net cash outflow from financing activities (4,572) (2,761)
Net increase in cash and cash equivalents in the period 989 3,026
Cash and cash equivalents at beginning of the period 3,927 872
Exchange rate effects (21) 29
Cash and cash equivalents at the end of the period 4,895 3,927
Cash and cash equivalents consists of:
Cash and cash equivalents 4,979 4,067
Overdrafts (84) (140)
4,895 3,927
Consolidated Statement of Recognised Income and Expense
As restated
For the year ended 31 December 2005 2004
$m $m
Profit for the period 4,724 3,683
Foreign exchange adjustments on consolidation (1,052) 744
Available for sale (losses)/gains taken to equity, net of tax (10) 31
Actuarial loss for the period (35) (179)
Tax on items taken directly to reserves (25) 416
Total recognised income and expense for the period 3,602 4,695
Attributable to:
Equity holders of the Company 3,595 4,690
Minority interests 7 5
Notes to the Preliminary Announcement
1 BASIS OF PREPARATION AND ACCOUNTING POLICIES
The preliminary announcement for the full year ended 31 December 2005 has been
prepared in accordance with International Accounting Standards and International
Financial Reporting Standards (collectively 'IFRS') as adopted by the European
Union (EU) at 31 December 2005. Details of the accounting policies applied are
set out in the IFRS Restatement information in AstraZeneca PLC's Annual Report
and Form 20-F Information 2004, except that, in the period under review, the
amendment to IAS 39 'Financial Instruments: Recognition and Measurement - The
Fair Value Option' has been adopted. As a result, the accounting for long term
loans has been changed; such loans are now categorised as fair value through
profit and loss with changes in value recognised in the income statement.
Previously these loans had been recognised at cost except where hedge accounting
had been applied. The comparative information has been restated accordingly.
The effect of adoption on comparative results was not significant: net assets at
31 December 2004 were reduced by $21m. The annual financial information
presented in this preliminary announcement for the year ended 31 December 2005
is extracted from, and is consistent with, that in the Group's audited financial
statements for the year ended 31 December 2005, and those financial statements
will be delivered to the Registrar of Companies following the Company's Annual
General Meeting.
The information contained in Note 3 updates the disclosures concerning legal
proceedings and contingent liabilities in the Company's Annual Report and Form
20-F Information 2004 and the Third Quarter and Nine Months Results 2005.
Information in this preliminary announcement does 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 2004, which were
prepared under accounting practices generally accepted in the UK, have been
filed with the Registrar of Companies. The auditors' report on those accounts
was unqualified and did not contain any statement under Section 237 of the
Companies Act 1985.
2 NET FUNDS
The table below provides an analysis of net funds and a reconciliation of net
cash flow to the movement in net funds.
As restated
1 Jan Cash Other Exchange At 31 Dec
2005 flow non-cash movements 2005
$m $m $m $m $m
Loans due after 1 year (1,127) - 16 - (1,111)
Total loans (1,127) - 16 - (1,111)
Other investments - current 1,198 491 (63) (2) 1,624
Cash and cash equivalents 4,067 935 - (23) 4,979
Overdrafts (140) 54 - 2 (84)
Short term borrowings (2) (3) - (1) (6)
5,123 1,477 (63) (24) 6,513
Net funds 3,996 1,477 (47) (24) 5,402
Other non-cash movements in the period consist of fair value adjustments under
IAS 39.
3 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 and
the validity of certain patents. 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 2004
and the Third Quarter and Nine Months Results 2005.
Matters disclosed in respect of the fourth quarter of 2005 and January 2006
DiprivanTM (propofol)
In respect of the notification received from Amphastar Pharmaceuticals, Inc. in
September 2005 under section 505(b)(2) of the US Food, Drug, and Cosmetic Act,
AstraZeneca did not file a patent infringement complaint against Amphastar.
LosecTM/PrilosecTM (omeprazole)
In January 2006, AstraZeneca Canada Inc. was served with a claim in the Federal
Court of Canada for payment of an undetermined sum based on damages allegedly
suffered by Apotex, due to the delay from January 2002 to January 2004 in the
issuance to Apotex of a notice of compliance (marketing approval) in Canada for
its 20mg omeprazole capsule product. AstraZeneca believes the claim is without
merit and intends to defend it and to pursue its already pending patent
infringement action against Apotex vigorously.
NexiumTM (esomeprazole magnesium)
As previously disclosed, in November 2005 AstraZeneca commenced patent
infringement litigation in the US District Court for the District of New Jersey
against Ranbaxy Pharmaceuticals, Inc. and its affiliates in response to
Ranbaxy's paragraph IV certifications regarding NexiumTM, received in October
2005.
In January 2006, AstraZeneca received a notice from IVAX Pharmaceuticals Inc.
that IVAX Corporation had submitted an Abbreviated New Drug Application to the
US FDA for esomeprazole magnesium delayed-release capsules, 20mg and 40mg. The
ANDA contained paragraph IV certifications of invalidity and/or non-infringement
in respect of certain AstraZeneca US patents listed in the FDA's Orange Book
with reference to NexiumTM, the latter of which expires in 2019. IVAX also
certified in respect of certain other AstraZeneca US patents listed in the
Orange Book with reference to NexiumTM that IVAX will not launch its product
prior to the expiry of those patents, the latter of which expires in October
2007. AstraZeneca has 45 days within which to commence a patent infringement
lawsuit against IVAX that would automatically stay, or bar, the FDA from
approving IVAX's ANDA for 30 months (or until an adverse court decision,
whichever occurs earlier). AstraZeneca is evaluating IVAX's notice and
continues to have full confidence in its intellectual property protecting Nexium
TM.
SeroquelTM (quetiapine fumarate)
As previously disclosed, in November 2005 in response to Teva's Abbreviated New
Drug Application and Teva's intent to market a generic version of SeroquelTM in
the US prior to the expiration of AstraZeneca's patent, AstraZeneca filed a
lawsuit against Teva in the US District Court for the District of New Jersey for
wilful patent infringement.
AstraZeneca has now been served in the US with a total of approximately 60
lawsuits in which plaintiffs contend that they developed diabetes or other
allegedly related injuries as a result of taking SeroquelTM and/or atypical
antipsychotics made by other pharmaceutical companies. The Company has also
been made aware that a putative nationwide class action complaint was recently
filed in federal court in the Southern District of Illinois. The complaint is
very similar in form and content to the complaint filed in the US District Court
for the Middle District of Florida in 2003 (Susan Zehel-Miller et al. v.
AstraZenaca (sic), AstraZenaca Pharmaceuticals LP, (sic), described in the
Company's Annual Report and Form 20-F Information 2004) that sought
certification of a nationwide class of SeroquelTM users and others, including
individuals who were alleged to have developed diabetes as a result of using
SeroquelTM. The federal court in Florida denied certification of the class in
the Zehel-Miller case. In early 2005, after the plaintiffs' efforts in that
case to secure appellate relief failed, the plaintiffs agreed to a voluntary
dismissal of all of their claims with prejudice. AstraZeneca has been informed
that more than 100 additional complaints involving SeroquelTM have just been
filed in various courts in the US, but these have not been served. It is
possible that plaintiffs' lawyers are contemplating the filing of potentially
numerous additional lawsuits against AstraZeneca and other manufacturers of
atypical anti-psychotics involving allegations concerning diabetes.
AstraZeneca intends to defend vigorously all of the pending cases relating to
SeroquelTM.
Toprol-XLTM (metoprolol succinate)
In the patent litigation continuing in the US against KV Pharmaceutical Company,
Andrx Pharmaceuticals LLC and Eon Labs Manufacturing Inc. relating to those
companies' notifications of their intentions to market generic versions of
Toprol-XLTM tablets prior to the expiration of AstraZeneca's relevant patents,
summary judgement motions were filed by the defendants and AstraZeneca on
validity, enforceability and infringement in 2005. Oral argument on all of the
pending summary judgement motions was heard in November 2005. As previously
disclosed, in January 2006 the US District Court for the Eastern District of
Missouri issued a ruling on the summary judgement motions. The court found that
the two patents-in-suit are unenforceable based on the Company's inequitable
conduct in the prosecution of these patents in the US Patent and Trademark
Office and invalid. The Company disagrees with and is disappointed by these
conclusions. AstraZeneca will appeal this decision. None of the Abbreviated
New Drug Applications filed by KV, Andrx or Eon has received tentative approval
from the US Food and Drug Administration. Under the ANDA statute, the January
2006 adverse decision concerning the validity and enforceability of the
AstraZeneca patents-in-suit automatically removes any stay on the FDA's
authority to grant final approval of the ANDAs.
In January 2006, AstraZeneca was served with a complaint filed in the US
District Court for the District of Delaware entitled Meijer, Inc. and Meijer
Distribution, Inc. v. AstraZeneca Pharmaceuticals LP, AstraZeneca LP,
AstraZeneca AB and Aktiebolaget Hassle. The complaint is a putative class
action that alleges that the AstraZeneca defendants attempted to illegally
maintain monopoly power in the US over Toprol-XLTM in violation of the Sherman
Act through the listing of invalid and unenforceable patents in the FDA's Orange
Book and the enforcement of such patents through litigation against generic
manufacturers seeking to market metoprolol succinate. The complaint seeks
treble damages based on alleged overcharges to the putative class of plaintiffs.
The lawsuit is based upon the finding described above by the US District Court
for the Eastern District of Missouri in the consolidated litigation against KV,
Andrx and Eon that the AstraZeneca patents relating to Toprol-XLTM are invalid
and unenforceable. As noted above, AstraZeneca is appealing this ruling in the
patent litigation. AstraZeneca denies the allegations of this anti-trust
complaint and will vigorously defend the lawsuit.
AstraZeneca continues to maintain that its patents for Toprol-XLTM are valid,
enforceable and infringed by the proposed generic products of KV, Andrx and Eon
and that its enforcement of its patents did not violate anti-trust laws.
Average wholesale price class action litigation
Since the original class action suit in Massachusetts naming AstraZeneca as a
defendant along with other pharmaceutical manufacturers, AstraZeneca and other
manufacturers have been sued in similar lawsuits filed by the state Attorneys
General of Pennsylvania, Nevada, Montana, Wisconsin, Illinois, Alabama,
Kentucky, Arizona and Mississippi, as well as by multiple individual counties in
the State of New York. The Attorney General lawsuits seek to recover alleged
overpayments under Medicaid and other state-funded healthcare programmes.
Since the decision on class certification issued by the District Court in Boston
in August 2005 and previously disclosed in the Third Quarter and Nine Months
Results 2005, as to the proposed classes involving physician-administered drugs,
the court has certified a nationwide class of Part B beneficiaries against
AstraZeneca and three other manufacturers. The additional proposed classes
involving physician-administered drugs, third-party payers who reimbursed for
physician-administered drugs or who covered Part B co-payments have been
certified only as Massachusetts state, as opposed to nationwide, classes. For
all classes, the only AstraZeneca drug at issue is ZoladexTM (goserelin acetate
implant).
There is a possibility that the decision on class certification will be
appealed. Following a decision on the appeal, the court will set a schedule for
summary judgement proceedings and trial. In the interim, Attorney General cases
are proceeding independently of the consolidated action in Pennsylvania,
Alabama, Mississippi, Arizona and Wisconsin.
AstraZeneca denies the allegations made in all the average wholesale price
lawsuits and will vigorously defend the actions.
Avorelin
The legal proceedings with Mediolanum farmaceutici S.p.A. in respect of the
licence agreement for avorelin have now been settled by the parties on terms
satisfactory to AstraZeneca (which admits no liability).
Matters previously disclosed in respect of the third quarter of 2005
DiprivanTM (propofol)
In September 2005, AstraZeneca received notification from Amphastar
Pharmaceuticals, Inc. under section 505(b)(2) of the US Food, Drug, and Cosmetic
Act that it intends to manufacture and sell propofol in the US prior to the
expiration of certain of AstraZeneca's propofol-related patents. Amphastar
contends that these patents would not be infringed by such manufacture and sale.
AstraZeneca is evaluating Amphastar's notification and continues to have full
confidence in its intellectual property protecting DiprivanTM.
LosecTM (omeprazole)
As previously disclosed, in June 2005 the European Commission notified
AstraZeneca PLC and AstraZeneca AB of its Decision to impose fines totaling €60
million on the companies for infringements of European competition law (Article
82 of the EC Treaty and Article 54 of the EEA Agreement). The fine was fully
provided for in the half year results through a charge to operating profit of
$75 million. AstraZeneca does not accept the Commission's Decision and has
appealed it to the Court of First Instance. AstraZeneca denies that it had a
dominant position or that it engaged in the behaviours as characterised by the
Commission. It is alleged by the Commission that these activities had the
effect of hindering the entry of the generic version of LosecTM and of parallel
trade. It is possible that third parties could seek damages for alleged losses
arising from this. Any such claims would be vigorously resisted.
NexiumTM (esomeprazole magnesium)
In October 2005, AstraZeneca received a notice from Ranbaxy Pharmaceuticals Inc.
that Ranbaxy Laboratories Limited has submitted an Abbreviated New Drug
Application to the US Food and Drug Administration for esomeprazole magnesium
delayed-release capsules, 20mg and 40mg, containing paragraph IV certifications
of invalidity and/or non-infringement with respect to certain AstraZeneca US
patents listed in the FDA's Orange Book in reference to NexiumTM, the latter of
which expires in 2019.
The 45 day time period within which AstraZeneca can commence a patent
infringement lawsuit against Ranbaxy that would automatically stay, or bar, the
FDA from approving Ranbaxy's ANDA for 30 months (or until an adverse court
decision, whichever occurs earlier) has not yet expired.
Ranbaxy has also certified with respect to certain other AstraZeneca US patents
listed in the Orange Book in reference to NexiumTM that Ranbaxy will not launch
its product prior to the expiry of those patents, the latter of which expires in
October 2007.
AstraZeneca is evaluating Ranbaxy's notice and continues to have full confidence
in its intellectual property protecting NexiumTM.
PulmicortTM RespulesTM (budesonide inhalation suspension)
In September 2005, AstraZeneca received a notice from IVAX Pharmaceuticals, Inc.
that IVAX has submitted an Abbreviated New Drug Application to the US Food and
Drug Administration for a budesonide inhalation suspension containing a
paragraph IV certification alleging invalidity and non-infringement in respect
of certain of AstraZeneca's patents relating to budesonide inhalation
suspension.
In October 2005, AstraZeneca filed a patent infringement action against IVAX in
the US District Court for the District of New Jersey.
SeroquelTM (quetiapine fumarate)
In September 2005, AstraZeneca received a notice from Teva Pharmaceuticals USA
that Teva has submitted an Abbreviated New Drug Application to the US Food and
Drug Administration for quetiapine fumarate tablets (25mg base) containing a
paragraph IV certification alleging invalidity and non-infringement in respect
of AstraZeneca's US patent number 4,879,288. AstraZeneca's US patent number
4,879,288 is listed in the FDA's Orange Book in reference to SeroquelTM.
AstraZeneca is evaluating Teva's notice and continues to have full confidence in
its intellectual property protecting SeroquelTM.
The 45 day time period within which AstraZeneca can commence a patent
infringement lawsuit against Teva that would automatically stay, or bar, the FDA
from approving Teva's ANDA for 30 months (or until an adverse court decision,
whichever occurs earlier) has not yet expired.
AstraZeneca has been served in the US with approximately 40 SeroquelTM cases in
which plaintiffs have alleged that they developed diabetes, and in some cases
pancreatitis, as a result of taking SeroquelTM or other atypical anti-psychotics
made by other pharmaceutical companies. Eli Lilly, the maker of olanzapine, is
a defendant in all but four of these cases and Janssen Pharmaceutica is a
defendant in more than a dozen of the matters. The vast majority of these cases
recently were filed in Missouri. All of the Missouri cases were filed a day or
two before Missouri's tort reform laws became effective. AstraZeneca has been
informed that other cases involving SeroquelTM were filed in Missouri but have
not yet been served. Only two of the pending SeroquelTM cases involving
diabetes allegations have gone beyond the pleadings stage. AstraZeneca intends
vigorously to defend the claims in these actions.
Toprol-XLTM (metoprolol succinate)
As disclosed in the Annual Report and Form 20-F Information 2004, patent
litigation is continuing in the US against KV Pharmaceutical Company, Andrx
Pharmaceuticals LLC and Eon Labs Manufacturing Inc. relating to those companies'
notifications of their intentions to market generic versions of Toprol-XLTM
tablets prior to the expiration of AstraZeneca's relevant patents. All of the
patent litigation has been consolidated for pre-trial discovery purposes and
motion practice in the US District Court for the Eastern District of Missouri.
As previously disclosed, in January 2005 AstraZeneca filed a terminal disclaimer
of the Toprol-XLTM patents-in-suit over one of the other patents raised by the
defendants, which will result in a revision of the expiration date of the
Toprol-XLTM patents-in-suit from March 2008 to September 2007. Under the
Abbreviated New Drug Application statute, the US Food and Drug Administration
may not approve Andrx's product before June 2006 or Eon's product before August
2006, unless there is an earlier adverse court decision. The 30 months' stay in
respect of KV's product has expired.
The trial in the proceedings is scheduled to commence in February 2006 and will
likely consolidate the cases against KV, Andrx and Eon. Oral arguments on the
pending summary judgement motions on the infringement and validity of the
patents, those motions having been filed by the defendants in December 2004,
were scheduled for November 2005.
In September 2005, AstraZeneca received a paragraph IV notification from KV of
its intention to market metoprolol succinate tablets in the 25mg dose prior to
the expiration of AstraZeneca's patents. AstraZeneca has filed a patent
infringement suit against KV in the US District Court for the Eastern District
of Missouri.
AstraZeneca maintains that its patents are valid, enforceable and infringed by
the KV, Andrx and Eon products.
Average wholesale price class action litigation
As disclosed in the Annual Report and Form 20-F Information 2004, 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. The suit seeks to recover unspecified damages.
AstraZeneca was also named as a co-defendant with various other pharmaceutical
manufacturers in similar suits filed in nine other states. Most of these suits
were consolidated with the Massachusetts action for pre-trial purposes, pursuant
to federal multi-district litigation procedures.
In August 2005, the District Court in Boston issued a decision on class
certification favourable to the defendants. The plaintiffs had sought to
certify three nationwide classes of plaintiffs: (1) Medicare Part B
beneficiaries who paid allegedly inflated co-payments for certain
physician-administered (injectable) drugs reimbursed under the Medicare Part B
programme; (2) third-party payers offering MediGap coverage for the same
physician-administered drugs or otherwise reimbursed outside Medicare for the
drugs; and (3) payers for certain non-Part B (self-administered) drugs.
The court denied the self-administered drug class entirely. As to the two
proposed classes involving physician-administered drugs, the court conditionally
certified a nationwide class of Part B beneficiaries, provided that the
plaintiffs can amend the complaint to include as class representatives
individual Part B beneficiaries who actually paid Medicare co-payments for the
named drugs. The second proposed physician-administered drug class, third-party
payers who reimbursed for physician-administered drugs or covered Part B
co-payments, was certified only as a Massachusetts state, as opposed to a
nationwide, class. In both classes, the only AstraZeneca drug at issue is
ZoladexTM (goserelin acetate implant).
Drug importation anti-trust litigation
As disclosed in the Annual Report and Form 20-F Information 2004 and Half Year
Results 2005, AstraZeneca Pharmaceuticals LP and eight other pharmaceutical
manufacturers have been defending a purported class action filed in the US
District Court for Minnesota which alleged that the defendants conspired to
prevent American consumers from purchasing prescription drugs from Canada, '
depriving consumers of the ability to purchase' drugs at competitive prices.
Earlier in 2005, the chief magistrate judge assigned to the case issued a report
on the defendants' motion to dismiss the case, making certain recommendations to
the presiding district court judge. The report recommended dismissal of the
plaintiffs' federal anti-trust claims, but not dismissal of the state statutory
and common law claims. In August 2005, the district court dismissed with
prejudice the plaintiffs' federal anti-trust claims. As to the state statutory
and common law claims, the district court declined to exercise supplemental
jurisdiction and dismissed them without prejudice. The plaintiffs have appealed
the district court's decision. In the similar California state court
proceedings, the trial is scheduled to commence in July 2006.
Avorelin
In 1999, AstraZeneca UK Limited entered into a licence agreement with Mediolanum
farmaceutici S.p.A. under which Mediolanum licensed to AstraZeneca certain
rights in respect of avorelin, a luteinising hormone-releasing hormone agonist.
At the end of 2000, AstraZeneca terminated the agreement. Mediolanum has
commenced proceedings against AstraZeneca alleging that AstraZeneca breached the
terms of the agreement and claiming damages. AstraZeneca denies any breach of
the agreement and is vigorously defending the proceedings. The trial in the
proceedings is scheduled to commence in the English courts in February 2006.
General
With respect to each of the legal proceedings described above, we are unable to
make estimates of the loss or range of losses at this stage, other than where
noted in the case of the European Commission fine. We also do not believe that
disclosure of the amount sought by plaintiffs, if that is known, would be
meaningful with respect to those legal proceedings.
Arrangements with Merck
As described in more detail in the Annual Report and Form 20-F Information 2004,
AstraZeneca has significant arrangements with Merck & Co., Inc. relating to
certain of our products and development compounds (the agreement products).
These arrangements include exit provisions from 2008 onwards and we regularly
monitor the value of the benefits we expect to receive.
The exit provisions are subject to a minimum overall net payment of $3.3 billion
and will offer AstraZeneca unencumbered discretion in its operations in the US
market (except in respect of PrilosecTM and NexiumTM) without the restrictions
of various contractual obligations that are currently imposed as a result of
Merck's interests, together with relief from contingent payment obligations.
The projected value of the benefits obtained in 2008 depends on a number of
factors including the future contributions from products that have already been
launched, those that are due to be launched in the US and those that are in
development together with the further value AstraZeneca can extract from greater
freedom to operate in the US.
4 FULL YEAR TERRITORIAL SALES ANALYSIS
% Growth
Full Year Full Year
2005 2004 Constant
$m $m Actual Currency
US 10,771 9,631 12 12
Canada 976 876 11 2
North America 11,747 10,507 12 11
France 1,654 1,597 4 1
UK 757 589 29 27
Germany 1,223 994 23 20
Italy 1,152 1,082 6 3
Sweden 295 298 (1) (3)
Europe others 3,382 3,089 9 6
Total Europe 8,463 7,649 11 8
Japan 1,527 1,430 7 8
China 272 203 34 33
Rest of World 1,941 1,637 19 13
Total 23,950 21,426 12 10
5 FOURTH QUARTER TERRITORIAL SALES ANALYSIS
% Growth
4th Quarter 4th Quarter
2005 2004 Constant
$m $m Actual Currency
US 2,907 2,657 9 9
Canada 257 225 14 5
North America 3,164 2,882 10 9
France 389 389 - 3
UK 196 157 25 28
Germany 306 277 10 13
Italy 274 273 - 3
Sweden 63 76 (17) (12)
Europe others 861 816 6 7
Total Europe 2,089 1,988 5 7
Japan 424 412 3 8
China 76 57 33 31
Rest of World 533 460 16 10
Total 6,286 5,799 8 9
6 FULL YEAR PRODUCT SALES ANALYSIS
World US
Full Year Full Year Actual Constant Full Year Actual
2005 2004 Growth Currency 2005 Growth
$m $m % Growth $m %
%
Gastrointestinal:
Losec 1,652 1,947 (15) (17) 264 (28)
Nexium 4,633 3,883 19 18 3,125 15
Others 70 88 (20) (21) 14 (58)
Total Gastrointestinal 6,355 5,918 7 5 3,403 9
Cardiovascular:
Zestril 332 440 (25) (27) 6 (91)
Seloken/Toprol-XL 1,735 1,387 25 24 1,291 32
Atacand 974 879 11 8 232 (8)
Plendil 360 455 (21) (23) 84 (49)
Tenormin 352 368 (4) (5) 25 (29)
Crestor 1,268 908 40 38 730 34
Others 311 340 (9) (12) 4 (71)
Total Cardiovascular 5,332 4,777 12 10 2,372 15
Respiratory:
Pulmicort 1,162 1,050 11 9 682 18
Rhinocort 387 361 7 6 277 7
Symbicort 1,006 797 26 22 - -
Accolate 72 116 (38) (39) 46 (45)
Oxis 91 101 (10) (14) - -
Others 155 158 (2) (5) - -
Total Respiratory 2,873 2,583 11 9 1,005 9
Oncology:
Zoladex 1,004 917 9 7 117 (23)
Casodex 1,123 1,012 11 10 239 3
Nolvadex 114 134 (15) (16) 5 150
Arimidex 1,181 811 46 44 476 59
Iressa 273 389 (30) (31) 66 (63)
Faslodex 140 99 41 39 90 11
Others 10 14 (29) (36) - -
Total Oncology 3,845 3,376 14 12 993 5
Neuroscience:
Seroquel 2,761 2,027 36 35 2,003 33
Zomig 352 356 (1) (3) 121 (18)
Diprivan 369 500 (26) (27) 147 (44)
Local anaesthetics 511 542 (6) (8) 70 (47)
Others 66 71 (7) (8) 18 (10)
Total Neuroscience 4,059 3,496 16 15 2,359 14
Infection and Other:
Merrem 505 423 19 15 85 25
Other Products 334 293 14 13 190 36
Total Infection and Other 839 716 17 14 275 32
Aptium Oncology 335 304 10 10 335 10
Astra Tech 312 256 22 19 29 53
Total 23,950 21,426 12 10 10,771 12
7 FOURTH QUARTER PRODUCT SALES ANALYSIS
World US
4th 4th Constant 4th
Quarter Quarter Actual Currency Quarter Actual
2005 2004 Growth Growth 2005 Growth
$m $m % % $m %
Gastrointestinal:
Losec 411 446 (8) (8) 73 (8)
Nexium 1,247 1,106 13 13 849 8
Others 19 24 (21) (17) 6 (45)
Total Gastrointestinal 1,677 1,576 6 6 928 6
Cardiovascular:
Zestril 84 113 (26) (26) 10 (52)
Seloken/Toprol-XL 455 381 19 19 346 29
Atacand 247 240 3 3 53 (16)
Plendil 73 94 (22) (22) 6 (77)
Tenormin 90 97 (7) (5) 8 (11)
Crestor 353 312 13 12 203 4
Others 76 84 (10) (10) 1 (50)
Total Cardiovascular 1,378 1,321 4 4 627 7
Respiratory:
Pulmicort 338 313 8 8 212 13
Rhinocort 92 93 (1) (2) 63 (7)
Symbicort 264 219 21 22 - -
Accolate 17 32 (47) (47) 11 (54)
Oxis 22 25 (12) (12) - -
Others 40 40 - 3 - -
Total Respiratory 773 722 7 7 286 2
Oncology:
Zoladex 252 242 4 5 23 (32)
Casodex 283 276 3 5 60 (5)
Nolvadex 28 35 (20) (17) 2 -
Arimidex 325 233 39 40 131 58
Iressa 72 80 (10) (9) 17 -
Faslodex 39 26 50 50 23 21
Others 2 3 (33) (33) - -
Total Oncology 1,001 895 12 13 256 19
Neuroscience:
Seroquel 755 562 34 34 553 34
Zomig 94 89 6 6 39 11
Diprivan 88 126 (30) (29) 35 (44)
Local anaesthetics 131 144 (9) (9) 22 (41)
Others 16 17 (6) - 5 -
Total Neuroscience 1,084 938 16 16 654 18
Infection and Other:
Merrem 130 113 15 14 24 71
Other Products 72 86 (16) (16) 36 (28)
Total Infection and Other 202 199 2 1 60 (6)
Aptium Oncology 88 78 13 13 88 13
Astra Tech 83 70 19 20 8 33
Total 6,286 5,799 8 9 2,907 9
Convenience Translation of Key Financial Information
2005 2004 2005 2004 2005 2004
For the quarter ended 31 December $m $m £m £m SEKm SEKm
Total Sales 6,286 5,799 3,646 3,364 49,951 46,081
Operating profit 1,636 1,271 949 737 13,000 10,100
Profit before tax 1,689 1,295 980 751 13,421 10,291
Net profit for the period 1,227 929 712 539 9,750 7,382
Earnings per Ordinary Share $0.77 $0.55 £0.45 £0.32 SEK6.12 SEK4.37
2005 2004 2005 2004 2005 2004
For the year ended 31 December $m $m £m £m SEKm SEKm
Total Sales 23,950 21,426 13,893 12,429 190,315 170,258
Operating profit 6,502 4,547 3,772 2,638 51,667 36,132
Profit before tax 6,667 4,844 3,867 2,810 52,978 38,492
Net profit for the year 4,724 3,683 2,740 2,136 37,539 29,266
Basic earnings per Ordinary $2.91 $2.18 £1.69 £1.26 SEK23.12 SEK17.32
Share
Earnings per Ordinary Share $2.91 $2.01 £1.69 £1.17 SEK23.12 SEK15.97
before exceptional items
Dividend per Ordinary Share $1.30 $0.94 £0.737 £0.503 SEK10.01 SEK6.697
Net cash inflow from operating 6,743 4,817 3,911 2,794 53,582 38,278
activities
Increase in cash & cash 989 3,026 574 1,755 7,859 24,046
equivalents
Capital and Reserves 13,597 14,404 7,887 8,355 108,047 114,459
Attributable to Equity Holders
All Sterling (£) and Swedish krona (SEK) equivalents are shown for convenience
and have been calculated using the current period end rates of $1= £ 0.58008 and
$1= SEK 7.94635, respectively. Dividend per Ordinary Share is shown as the
actual amount payable using the rates at the date of declaration of the
dividend.
Information for US Investors
RECONCILIATION TO UNITED STATES ACCOUNTING PRINCIPLES
The consolidated income statement and balance sheet set out on pages 13 and 15
are prepared in accordance with IASs and IFRSs (collectively 'IFRS') endorsed by
the European Union and available for use by European companies at 31 December
2005. The following is a summary of the differences between IFRS and accounting
principles generally accepted in the United States (US GAAP) as they apply to
AstraZeneca PLC.
Purchase accounting adjustments
Under IFRS, the merger of Astra and Zeneca is accounted for as a 'merger of
equals' (pooling-of-interests) as a result of the business combinations
exemption permitted by IFRS 1 'First-time Adoption of International Financial
Reporting Standards'. Under US GAAP the merger was accounted for as the
acquisition of Astra by Zeneca using 'purchase accounting'. Under purchase
accounting, the assets and liabilities of the acquired entity are recorded at
fair value. As a result of the fair value exercise, increases in the values of
Astra's tangible fixed assets and inventory were recognised and values
attributed to its in-process research and development and existing products,
together with appropriate deferred taxation effects. The difference between the
cost of investment and the fair value of the assets and liabilities of Astra was
recorded as goodwill. The amount allocated to in-process research and
development was, as required by US GAAP, expensed immediately in the first
reporting period after the business combination. Fair value adjustments to the
recorded amount of inventory were expensed in the period the inventory was
utilised. Additional amortisation and depreciation have also been recorded in
respect of the fair value adjustments to tangible and intangible assets.
Under IFRS, up until 31 December 2002, goodwill was required to be capitalised
and amortised. From 1 January 2003 goodwill is tested annually for impairment
but not amortised. Under US GAAP, there is an equivalent requirement, but the
effective date was 1 January 2002.
Capitalisation of interest
AstraZeneca does not capitalise interest under IFRS. US GAAP requires interest
incurred as part of the cost of constructing fixed assets to be capitalised and
amortised over the life of the asset.
Deferred taxation
The IFRS full provision for deferred taxation is made although there are a
number of different bases from US GAAP on which this calculation is made, for
example, the elimination of intra-group profit on inventories and share-based
payment transactions. Deferred taxation is provided on a full liability basis
under US GAAP, which requires deferred tax assets to be recognised without a
valuation allowance if their realisation is considered to be more likely than
not.
Pension and post-retirement benefits
IFRS requires that in respect of defined benefit plans, obligations are measured
at discounted fair value whilst plan assets are recorded at fair value. The
operating and financing costs of such plans are recognised separately in the
income statement; service costs are spread systematically over the lives of
employees and financing costs are recognised in the periods in which they arise.
US GAAP adopts a similar approach. Under IFRS, actuarial gains and losses are
permitted to be recognised immediately in the statement of recognised income and
expense. Under US GAAP, such actuarial gains and losses are permitted to be
amortised on a straight-line basis over the average remaining service period of
employees. A minimum pension liability is also recognised through other
comprehensive income in certain circumstances when there is a deficit of plan
assets relative to the accumulated benefits obligation.
Intangible assets
Under IFRS certain payments for rights to compounds in development are
capitalised. Under US GAAP these payments are generally expensed.
Financial instruments and hedging activities
Under IFRS, financial assets and certain financial liabilities (including
derivatives) are recognised at fair value; movements in the fair value may be
recorded in equity or through income, depending upon their categorisation.
Under US GAAP, marketable equity and all debt securities are recognised at fair
value, with movements in fair value taken to a separate component of equity.
Derivatives are also measured at fair value with movements taken through income.
However, financial liabilities are recorded at amortised cost.
New accounting standards adopted
AstraZeneca has adopted the provisions of SFAS No. 123 (R) 'Share-Based Payment'
in the period under review. SFAS No. 123 (R) requires compensation cost related
to share based payments to be recognised in the financial statements.
AstraZeneca has used the transitional arrangements for modified retrospective
application in adopting SFAS No. 123 (R). As a consequence, the comparative US
GAAP income before tax has been reduced by $147 million with a related tax
credit of $58 million and the shareholders' equity at 31 December 2004 increased
by $163m.
RECONCILIATION TO UNITED STATES ACCOUNTING PRINCIPLES (CONTINUED)
The approximate effects on income and shareholders' equity of the GAAP
differences are shown in the following tables.
As restated
Income attributable to Shareholders 2005 2004
For the year ended 31 December $m $m
Net income for the period under IFRS from continuing
operations 4,706 3,664
Adjustments to conform to US GAAP
Purchase accounting adjustments (amortisation and depreciation) (1,019) (1,014)
Capitalisation less disposals and amortisation of interest (13) (1)
Deferred taxation
- on purchase accounting adjustments 283 283
- others 65 55
Pension expense and other post-retirement benefits expense (74) (52)
Financial instruments (35) 61
In-licensed development intangibles (29) (46)
Other - 1
Net income in accordance with US GAAP 3,884 2,951
Net income per Ordinary Share under US GAAP - basic and diluted $2.40 $1.76
RECONCILIATION TO UNITED STATES ACCOUNTING PRINCIPLES (CONTINUED)
Shareholders' equity
As at 31 December As restated
2005 2004
$m $m
Shareholders' equity under IFRS 13,597 14,404
Adjustments to conform to US GAAP
Purchase accounting adjustments:
- goodwill 13,562 15,229
- tangible and intangible fixed assets 5,229 6,988
Capitalisation, less disposals and amortisation of interest 241 254
Deferred taxation
- on purchase accounting adjustments (1,629) (2,134)
- others (492) (618)
Pension and other post-retirement benefits 1,483 1,418
Financial instruments 18 22
In-licensed development intangibles (112) (83)
Other (3) (3)
Shareholders' equity in accordance with US GAAP 31,894 35,477
Shareholder Information
ANNOUNCEMENTS AND MEETINGS
Announcement of first quarter 2006 results 27 April 2006
Annual General Meeting 2006 27 April 2006
Announcement of second quarter and half year 2006 results 27 July 2006
Announcement of third quarter and nine months 2006 26 October 2006
results
DIVIDENDS
The record date for the first interim dividend paid on 19 September 2005 was 12
August 2005. Ordinary Shares traded ex-dividend on the London and Stockholm
Stock Exchanges from 10 August 2005. ADRs traded ex-dividend on the New York
Stock Exchange from the same date.
The record date for the second interim dividend for 2005 payable on 20 March
2006 (in the UK, Sweden and the US) will be 10 February 2006. Ordinary Shares
will trade ex-dividend on the London and Stockholm Stock Exchanges from 8
February 2006. ADRs will trade ex-dividend on the New York Stock Exchange from
the same date.
Dividends will normally be paid as follows:
First interim Announced in July and paid in September
Second interim Announced in January/February and paid in March
TRADEMARKS
The following brand names used in this interim report are trademarks of the
AstraZeneca group of companies:
Accolate Arimidex Astra Tech Atacand Casodex Crestor Diprivan Exanta
Faslodex Iressa Losec Merrem Nexium Nolvadex Oxis Plendil Prilosec
Pulmicort Pulmicort Respules Rhinocort Rhinocort Aqua Seloken Seroquel
Symbicort Symbicort Maintenance and Reliever Therapy Tenormin Toprol-XL
Zactima Zestril Zoladex Zomig
ADDRESSES FOR CORRESPONDENCE
Registrar and Depositary Registered Office Swedish Securities
Transfer Office for ADRs Registration Centre
The AstraZeneca Registrar JP Morgan Chase Bank 15 Stanhope Gate VPC AB
Lloyds TSB Registrars JP Morgan Service Center London PO Box 7822
The Causeway PO Box 3408 W1K 1LN SE-103 97 Stockholm
Worthing South Hackensack UK Sweden
West Sussex NJ 07606-3408
BN99 6DA US
UK Tel: +44 (0)20 7304 5000 Tel: +46 (0)8 402 9000
Tel (freephone in UK): Tel (toll free in US):
0800 389 1580 888 697 8018
Tel (outside UK): Tel (outside US):
+44 (0)121 415 7033 +1 (201) 680 6630
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
In order to utilise the 'Safe Harbor' provisions of the United States Private
Securities Litigation Reform Act of 1995, AstraZeneca is providing the following
cautionary statement. This preliminary announcement contains forward-looking
statements with respect to the financial condition, results of operations and
businesses of AstraZeneca. By their nature, forward-looking statements and
forecasts involve risk and uncertainty because they relate to events and depend
on circumstances that will occur in the future. There are a number of factors
that could cause actual results and developments to differ materially from that
expressed or implied by these forward-looking statements. These factors
include, among other things, the loss or expiration of patents, marketing
exclusivity or trade marks; exchange rate fluctuations; the risk that R&D will
not yield new products that achieve commercial success; 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 delay to new product launches; the
difficulties of obtaining and maintaining governmental approvals for products;
and the risk of environmental liabilities.
This information is provided by RNS
The company news service from the London Stock Exchange
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