Final Results - Part 2 of 3
AstraZeneca PLC
31 January 2008
Consolidated Income Statement
2007 2006
For the year ended 31 December $m $m
Sales 29,559 26,475
Cost of sales (6,419) (5,559)
Distribution costs (248) (226)
Research and development (5,162) (3,902)
Selling, general and administrative costs (10,364) (9,096)
Other operating income and expense 728 524
Operating profit 8,094 8,216
Finance income 959 888
Finance expense (1,070) (561)
Profit before tax 7,983 8,543
Taxation (2,356) (2,480)
Profit for the period 5,627 6,063
Attributable to:
Equity holders of the Company 5,595 6,043
Minority interests 32 20
5,627 6,063
Basic earnings per $0.25 Ordinary Share $3.74 $3.86
Diluted earnings per $0.25 Ordinary Share $3.73 $3.85
Weighted average number of Ordinary Shares in issue (millions) 1,495 1,564
Diluted average number of Ordinary Shares in issue (millions) 1,498 1,570
Dividends for the period 2,740 2,649
Consolidated Income Statement
2007 2006
For the quarter ended 31 December $m $m
Sales 8,170 7,154
Cost of sales (1,821) (1,578)
Distribution costs (67) (61)
Research and development (1,432) (1,124)
Selling, general and administrative costs (3,055) (2,511)
Other operating income and expense 134 123
Operating profit 1,929 2,003
Finance income 256 267
Finance expense (348) (167)
Profit before tax 1,837 2,103
Taxation (562) (658)
Profit for the period 1,275 1,445
Attributable to:
Equity holders of the Company 1,266 1,432
Minority interests 9 13
1,275 1,445
Basic earnings per $0.25 Ordinary Share $0.86 $0.93
Diluted earnings per $0.25 Ordinary Share $0.86 $0.93
Weighted average number of Ordinary Shares in issue (millions) 1,464 1,540
Diluted average number of Ordinary Shares in issue (millions) 1,466 1,545
Consolidated Balance Sheet
2007 2006
As at 31 December $m $m
ASSETS
Non-current assets
Property, plant and equipment 8,298 7,453
Goodwill 9,884 1,097
Intangible assets 11,467 3,107
Other investments 182 119
Deferred tax assets 1,044 1,220
30,875 12,996
Current assets
Inventories 2,119 2,250
Trade and other receivables 6,668 5,561
Other investments 177 657
Income tax receivable 2,251 1,365
Cash and cash equivalents 5,867 7,103
17,082 16,936
Total assets 47,957 29,932
LIABILITIES
Current liabilities
Interest bearing loans and borrowings (4,280) (136)
Trade and other payables (6,968) (6,295)
Provisions (387) (39)
Income tax payable (3,552) (2,977)
(15,187) (9,447)
Non-current liabilities
Interest bearing loans and borrowings (10,876) (1,087)
Deferred tax liabilities (4,119) (1,559)
Retirement benefit obligations (1,998) (1,842)
Provisions (633) (327)
Other payables (229) (254)
(17,855) (5,069)
Total liabilities (33,042) (14,516)
Net assets 14,915 15,416
EQUITY
Capital and reserves attributable to equity holders of the Company
Share capital 364 383
Share premium account 1,888 1,671
Other reserves 1,902 1,902
Retained earnings 10,624 11,348
14,778 15,304
Minority equity interests 137 112
Total equity 14,915 15,416
Consolidated Cash Flow Statement
2007 2006
For the year ended 31 December $m $m
Cash flows from operating activities
Profit before taxation 7,983 8,543
Finance income and expense 111 (327)
Depreciation, amortisation and impairment 1,856 1,345
(Increase)/decrease in working capital (443) 108
Other non-cash movements 901 263
Cash generated from operations 10,408 9,932
Interest paid (335) (70)
Tax paid (2,563) (2,169)
Net cash inflow from operating activities 7,510 7,693
Cash flows from investing activities
Acquisition of business operations (14,891) (1,148)
Movement in short term investments and fixed deposits 894 1,120
Purchase of property, plant and equipment (1,130) (794)
Disposal of property, plant and equipment 54 35
Purchase of intangible assets (549) (545)
Disposal of intangible assets - 661
Purchase of non-current asset investments (35) (17)
Disposal of non-current asset investments 421 68
Interest received 358 352
Dividends paid by subsidiaries to minority interest (9) (4)
Net cash outflow from investing activities (14,887) (272)
Net cash (outflow)/inflow before financing activities (7,377) 7,421
Cash flows from financing activities
Proceeds from issue of share capital 218 985
Repurchase of shares (4,170) (4,147)
Dividends paid (2,641) (2,220)
Repayment of loans (1,165) -
Issue of loans 9,692 -
Movement in short term borrowings 4,117 16
Net cash inflow/(outflow) from financing activities 6,051 (5,366)
Net (decrease)/increase in cash and cash equivalents in the period (1,326) 2,055
Cash and cash equivalents at the beginning of the period 6,989 4,895
Exchange rate effects 64 39
Cash and cash equivalents at the end of the period 5,727 6,989
Cash and cash equivalents consists of:
Cash and cash equivalents 5,867 7,103
Overdrafts (140) (114)
5,727 6,989
Consolidated Statement of Recognised Income and Expense
2007 2006
For the year ended 31 December
$m $m
Profit for the period 5,627 6,063
Foreign exchange and other adjustments on consolidation 492 922
Foreign exchange differences on borrowings (40) -
Cash flow hedge in anticipation of debt issue (21) -
Available for sale losses taken to equity (9) (20)
Actuarial loss for the period (113) (108)
Tax on items taken directly to reserves 33 137
342 931
Total recognised income and expense for the period 5,969 6,994
Attributable to:
Equity holders of the Company 5,934 6,970
Minority interests 35 24
5,969 6,994
Notes to the Preliminary Announcement
1 BASIS OF PREPARATION AND ACCOUNTING POLICIES
The preliminary announcement for the full year ended 31 December 2007 has 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 2006. The annual financial
information presented in this preliminary announcement for the year ended 31
December 2007 is based on, and is consistent with, that in the Group's audited
financial statements for the year ended 31 December 2007, and those financial
statements will be delivered to the Registrar of Companies following the
Company's Annual General Meeting. The auditor's report on those financial
statements is unqualified and does not contain any statement under Section 237
of the Companies Act 1985.
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 2006 and the Third Quarter and Nine Months Results 2007.
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 2006 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 DEBT
The table below provides an analysis of net debt and a reconciliation of net
cash flow to the movement in net debt.
Acquisitions At 31
December
At 1 Jan Cash $m Non-cash Exchange 2007
2007 flow movements movements
$m $m $m $m $m
Loans due after 1 year (1,087) (9,692) - (57) (40) (10,876)
Current instalments of loans - 1,165 (1,165) - - -
Total loans (1,087) (8,527) (1,165) (57) (40) (10,876)
Other investments - current 657 (894) 279 132 3 177
Cash and cash equivalents 7,103 (1,301) - - 65 5,867
Overdrafts (114) (25) - - (1) (140)
Short term borrowings (22) (4,117) - - (1) (4,140)
7,624 (6,337) 279 132 66 1,764
Net funds/(debt) 6,537 (14,864) (886) 75 26 (9,112)
Non-cash movements in the period include fair value adjustments under IAS 39.
3 MEDIMMUNE, INC. ACQUISITION
On 1 June 2007, AstraZeneca announced the successful tender offer for all the
outstanding shares of common stock of MedImmune, Inc., a world-leading
biotechnology company with proven biologics discovery and development strength,
pipeline and leading biomanufacturing. At that date, approximately 96.0% of the
outstanding shares were successfully tendered; the remaining shares were
acquired by 18 June 2007. The financial results of MedImmune, Inc. have been
consolidated into the Company's results from 1 June 2007.
Cash consideration of $13.9 billion was paid for the outstanding shares. After
taking account of the cash and investments acquired, together with the
settlement of MedImmune's convertible debt and outstanding share options, the
total cash paid to acquire MedImmune is $15.6 billion.
In most business acquisitions, there is a part of the cost that is not capable
of being attributed in accounting terms to identifiable assets and liabilities
acquired and is therefore recognised as goodwill. In the case of the
acquisition of MedImmune, this goodwill is underpinned by a number of elements,
which individually cannot be quantified. Most significant amongst these is the
premium attributable to a pre-existing, well positioned business in the
innovation intensive, high growth biologics market with a highly skilled
workforce and established reputation. Other important elements include buyer
specific synergies, potential additional indications for identified products and
the core technological capabilities and knowledge base of the company.
MedImmune, Inc. contributed $714 million (Q4: $549 million) of turnover in the
period since acquisition. After amortisation, net investments/interest costs
(including interest costs of external financing of $446 million (Q4: $203
million) and tax), the loss attributable to MedImmune since acquisition is $410
million (Q4: $55 million). If the acquisition had taken effect at the beginning
of the reporting period (1 January 2007), on a proforma basis the revenue,
profit before tax and profit after tax of the combined Group for the full year
would have been $30,127 million, $7,576 million and $5,351 million,
respectively. Basic and diluted Earnings per Share for the combined Group would
have been $3.56 and $3.55, respectively. This proforma information has been
prepared taking into account amortisation, interest costs and related tax
effects but does not purport to represent the results of the combined Group that
actually would have occurred had the acquisition taken place on 1 January 2007
and should not be taken to be representative of future results.
Fair value
Book value adjustment Fair value
$m $m $m
Non-current assets
Intangible assets 193 7,882 8,075
Property, plant and equipment 523 70 593
Other 550 (17) 533
1,266 7,935 9,201
Current assets 1,439 115 1,554
Current liabilities (326) 39 (287)
Additional obligations related to
convertible debt and share options - (1,724) (1,724)
Non-current liabilities
Interest bearing loans and borrowings (1,165) - (1,165)
Other payables (73) - (73)
Deferred tax assets/(liabilities) 314 (2,694) (2,380)
(924) (2,694) (3,618)
Total assets acquired 1,455 3,671 5,126
Goodwill 8,757
Total consideration for outstanding shares* 13,883
Additional payments related to convertible
debt, share options and other acquisition 1,770
obligations
Less: cash acquired (979)
Net cash outflow 14,674
* The total consideration for outstanding shares includes $29m of directly
attributable costs.
4 RESTRUCTURING AND SYNERGY COSTS
Profit before tax for the full year ended 31 December 2007 is stated after
charging restructuring and synergy costs of $966 million ($362 million in the
fourth quarter). These have been charged to the income statement as follows:
4th Quarter Full year
$m $m
Cost of Sales 95 415
R&D 36 73
SG&A 231 478
Total 362 966
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 2006 and Third Quarter
and Nine Months Results 2007.
Matters disclosed in respect of the Fourth Quarter of 2007 and January 2008
CrestorTM (rosuvastatin)
AstraZeneca lists three patents in the FDA Orange Book: No. RE37,314 covering
the active ingredient (the '314 patent); No. 6,316,460 covering formulations
(the '460 patent); and No. 6,858,618 covering medical use (the '618 patent). The
'314 patent expires in January 2016, the '460 patent expires in August 2020, and
the '618 patent expires in December 2021. Between 30 October 2007 and 6 December
2007, AstraZeneca received Paragraph IV certification notice-letters from
Apotex, Inc. ('Apotex'); Aurobindo Pharma Limited ('Aurobindo'); Cobalt
Pharmaceuticals Inc and Cobalt Laboratories Inc ('Cobalt'); Glenmark
Pharmaceuticals Inc. USA ('Glenmark'); Mylan Pharmaceuticals, Inc. ('Mylan');
Par Pharmaceutical, Inc. ('Par'); Sandoz, Inc ('Sandoz'); Sun Pharmaceuticals
Industries Limited ('Sun'); and Teva Pharmaceuticals USA, Inc. ('Teva'). Each
entity notified AstraZeneca that it had submitted an Abbreviated New Drug
Application (ANDA) to the US 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. The notice-letters notified
AstraZeneca that each respective ANDA contained a Paragraph IV certification
alleging non-infringement, invalidity, or unenforceability of one or more of
AstraZeneca's three patents. In December 2007, in response to notice-letters
from seven of the nine manufacturers, AstraZeneca Pharmaceuticals LP,
AstraZeneca UK Limited, IPR Pharmaceuticals, Inc., and AstraZeneca's licensor,
Shionogi Seiyaku Kabushiki Kaisha ('Shionogi'), filed separate lawsuits in the
United States District Court for the District of Delaware, against Apotex,
Aurobindo, Cobalt, Mylan, Par, Sandoz and Sun for infringement of the patent
covering rosuvastatin calcium, the active ingredient in CrestorTM tablets.
AstraZeneca did not file patent infringement actions against Teva and Glenmark,
because they did not seek approval to market products before the 2016 expiration
date of the patent covering the active ingredient. In addition to filing
actions in the United States District Court for the District of Delaware, for
procedural reasons, AstraZeneca Pharmaceuticals LP, AstraZeneca UK Limited, IPR
Pharmaceuticals, Inc. and Shionogi filed three duplicate patent infringement
actions against Mylan, Aurobindo and Cobalt respectively in United States
District Courts in West Virginia, New Jersey and Florida. These cases proceed.
AstraZeneca continues to have full confidence in and will vigorously defend and
enforce its intellectual property protecting CrestorTM.
LosecTM/PrilosecTM (omeprazole)
As previously disclosed, in 2001, AstraZeneca filed a suit in the US against
Andrx Pharmaceuticals, Inc. ('Andrx') for infringement of a patent number
6,013,281 directed to a process for making an omeprazole formulation (the '281
patent). Andrx filed counterclaims of non-infringement, invalidity and
unenforceability for inequitable conduct during prosecution of the '281 patent.
Andrx also asserted that in addition to the '281 patent, two other formulation
patents, numbered 4,786,505 and 4,853,230 (the '505 and '230 patents), were
unenforceable for alleged litigation misconduct by AstraZeneca. Both parties
sought attorneys' fees. In May 2004, the US District Court for the Southern
District of New York ruled that the '281 patent was infringed, but also ruled
that the '281 patent was invalid.
The Federal Circuit has concluded that AstraZeneca's '505 and '230 formulation
patents remained enforceable. As a result of Andrx's infringement of '505 and '
230 patents, AstraZeneca was the prevailing party against Andrx in the lower
court. AstraZeneca is pursuing appropriate relief, including damages.
NexiumTM (esomeprazole)
Sales and marketing practices
AstraZeneca entities have been sued in various state and federal courts in the
US in purported representative class actions involving the marketing of NexiumTM
(esomeprazole magnesium). These actions generally allege that AstraZeneca's
promotion and advertising of NexiumTM to physicians and consumers is unfair,
unlawful and deceptive conduct, particularly as the promotion relates to
comparisons of NexiumTM with PrilosecTM. They also allege that AstraZeneca's
conduct relating to the pricing of NexiumTM was unfair, unlawful and deceptive.
The plaintiffs allege claims under various state consumer protection, unfair
practices and false advertising laws. The plaintiffs in these cases seek
remedies that include restitution, disgorgement of profits, damages, punitive
damages, injunctive relief, attorneys' fees and costs of suit.
In November 2005, the US District Court for the District of Delaware granted
AstraZeneca's motion to dismiss the consolidated class action complaint. In
September 2007, the US Court of Appeals for the Third Circuit affirmed the
dismissal and denied plaintiffs' petition for Rehearing En Banc. On 18 December
2007, plaintiffs filed a petition for writ of certiorari with the United States
Supreme Court. AstraZeneca's response to the petition is due in February 2008.
The Delaware state case has been stayed pending the outcome of the Delaware
federal cases.
Patent Litigation
In December 2007, AstraZeneca received another notice from Dr. Reddy's
Laboratories Inc. and Dr Reddy's Laboratories Limited ('Dr Reddy's') that Dr.
Reddy's had submitted an ANDA to the FDA for esomeprazole magnesium
delayed-release capsules, 20mg and 40mg. This notice challenges three Orange
Book-listed patents claiming esomeprazole magnesium (US Patent Nos. 5,714,504,
5,877,192 and 6,875,872). AstraZeneca's exclusivity relating to these three
patents expires on 3 August 2015, 27 November 2014 and 27 November 2014,
respectively. In January 2008, AstraZeneca commenced patent infringement
litigation in the US District Court for the District of New Jersey against Dr.
Reddy's in response to Dr. Reddy's paragraph IV certifications regarding Nexium
TM. No trial date has been set.
A 30-month stay will not prevent the FDA from approving an ANDA, and an at-risk
launch by a generic drug manufacturer may occur, of delayed-release esomeprazole
magnesium capsules in the year ending 31 December 2008.
In Canada, 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 has asserted in its notices that it has
filed an abbreviated new drug submission ('ANDS') in March 2007, for 20 and 40mg
esomeprazole magnesium trihydrate tablets and alleges non-infringement and/or
invalidity of numerous patents. AstraZeneca has responded by commencing seven
court applications in January 2008 under the Patented Medicines (Notice of
Compliance) Regulations. On 17 January 2008, Apotex advised that its product was
erroneously described as being a trihydrate in its recent allegations, which
allegations Apotex asserted it was withdrawing. Apotex mailed replacement
allegations on 17 January 2008, which AstraZeneca is entitled to challenge.
Apotex cannot obtain a notice of compliance (marketing approval) 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.
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 Seroquel
TM and/or other atypical anti-psychotic medications. As of 16 January 2008,
AstraZeneca was defending 8,121 served or answered lawsuits involving
approximately 12,347 plaintiff groups (24 January 2007: 604 served or answered
lawsuits involving approximately 7,450 plaintiff groups). To date, approximately
1,900 additional cases have been dismissed by order or agreement and
approximately 1,400 of those cases have been dismissed with prejudice.
Discovery directed to all parties is ongoing in most jurisdictions in these
SeroquelTM cases.
Patent Litigation
As previously disclosed, AstraZeneca has four pending patent infringement cases
against Teva Pharmaceuticals USA, Inc. and Sandoz, Inc, which have been
consolidated for the purpose of the proceeding discovery. A 30-month stay will
not prevent the FDA from approving an ANDA, and an at-risk launch by a generic
drug manufacturer may occur, of quetiapine fumarate tablets in the year ending
31 December 2008.
In October 2007, the Court granted AstraZeneca's partial summary judgement
motion based on collateral estoppel, which precludes Teva from relitigating
issues previously resolved against it in another previous patent litigation
involving Eli Lilly's anti-psychotic drug, Zyprexa.
AstraZeneca continues to have full confidence in its intellectual property
protecting SeroquelTM and will vigorously defend and enforce it.
Sales and Marketing Practices
In February 2007, the Commonwealth of Pennsylvania filed suit against
AstraZeneca, Eli Lilly & Co., and Janssen Pharmaceutica Inc. claiming damages
incurred by the Commonwealth as a result of alleged off-label promotion of
atypical anti-psychotics by the three manufacturers. The lawsuit is filed in
state court in Philadelphia and seeks to recover the cost to the Pennsylvania
Medicaid program and other state-funded health insurance programs for
prescriptions written as a result of the alleged off-label promotion. In
December 2007, the Court granted defendants' motion to sever the claims against
AstraZeneca and Janssen from those against Eli Lilly and directed the
Commonwealth to file separate complaints against the two severed defendants,
which the Commonwealth did in January 2008. Although no similar lawsuits have
been brought by states other than Pennsylvania, AstraZeneca has been informed
that the Attorney General's Offices of multiple other states have investigations
into similar SeroquelTM off-label issues. AstraZeneca has signed agreements
with 20 states tolling the statutes of limitations on potential claims, and has
been approached by additional states for similar tolling agreements.
AstraZeneca believes these claims to be without merit and intends to vigorously
defend the Pennsylvania lawsuit.
Average wholesale price class action litigation
As previously disclosed, the District Court in Boston who is managing the
multi-district average wholesale price litigation, certified three classes of
plaintiffs against the 'Track 1' manufacturer defendants, AstraZeneca,
GlaxoSmithKline, Bristol-Myers Squibb, Schering-Plough and Johnson & Johnson.
The three certified classes are: (Class 1) nationwide class of consumers who
made co-payments for certain physician-administered drugs reimbursed under the
Medicare Part B programme (Part B drugs); (Class 2) a Massachusetts-only class
of third-party payers, including insurance companies, union health and welfare
benefit plans, and self-insured employers, who covered consumer co-payments for
Part B drugs; and (Class 3) a Massachusetts-only class of third-party payers and
consumers who paid for Part B drugs outside of the Medicare programme. For all
classes, the only AstraZeneca drug at issue is ZoladexTM (goserelin acetate
implant).
A bench trial against four of the Track 1 defendants, including AstraZeneca, by
Classes 2 and 3 began in November 2006 and concluded in January 2007. A separate
jury trial against AstraZeneca only, involving the Class 1 claims, was scheduled
to begin in June 2007. However, in May 2007, the parties reached a proposed
settlement agreement resolving the Class 1 claims. The settlement, if ultimately
approved by the Court, will involve payments of up to $24 million, not including
attorneys' fees, to reimburse individual class members submitting claims.
AstraZeneca has agreed that $10 million of any unclaimed amounts will be donated
to charitable organisations funding cancer patient care and research. Notice of
proposed settlement was mailed to potential class members in December 2007, and
the Court has scheduled a hearing for final approval of the settlement in May
2008. A provision of $27 million was established in 2007.
In June 2007 and November 2007, the Court issued its decision on Classes 2 and
3. The Court found AstraZeneca liable under the Massachusetts consumer
protection statute for engaging in unfair and deceptive conduct in connection
with the pricing of ZoladexTM during the period 1998 to 2003. The Court awarded
double damages (with prejudgment interest) of $5.5 million for Class 2 and
single damages (with prejudgment interest) of $7.4 million for Class 3.
AstraZeneca believes the decision to be in error and has filed an appeal in
which it is confident it will prevail and so no provision has been made for
these awards.
The decision on Classes 2 and 3 and the settlement of Class 1 relate to Zoladex
TM only. The multiple Attorney General lawsuits pending against AstraZeneca and
other manufacturers nationwide, which involve numerous drugs in addition to
ZoladexTM, remain pending against the Company. The first of these cases
scheduled for trial is the case filed by the Alabama Attorney General in state
court in Montgomery, Alabama. That case is scheduled for a jury trial against
AstraZeneca beginning February 2008.
Government investigations into drug marketing practices
There are a number of active investigations led by state Attorneys General.
These include multiple investigations relating to SeroquelTM off-label issues,
along with an investigation by the Delaware Attorney General's Office into
marketing and sale activities within the State of Delaware.
Serious Fraud Office Inquiry
In December 2007, AstraZeneca received from the UK's Serious Fraud Office (SFO)
a request for documentation about its involvement in the United Nations Oil for
Food programme. AstraZeneca denies any allegation of illegal or unethical
behaviour in our trading relationships with Iraq. We will comply with the SFO's
request for documentation.
Anti-Trust
AstraZeneca is part of a sectoral Inquiry by the European Commission into the
pharmaceutical industry and was the subject of an unannounced inspection in
January 2008. The Inquiry relates to the introduction of innovative and generic
medicines and it will cover commercial practices, including the use of patents
and generics. We understand that several companies have been similarly
approached.
The Commission has stated that this Inquiry is not aimed at investigating
practices where there have been any indications of wrong-doing although it could
address any competition law breaches found by means of separate proceedings. The
Commission has also stated that it plans to issue an interim report in Autumn
2008 and envisages that the final results of its Inquiry will be available in
Spring 2009.
AstraZeneca is co-operating fully with the Commission in relation to its
Inquiry.
Taxation
Where tax exposures can be quantified, an accrual is made based on best
estimates and management's judgement. Details of the movements in relation to
material tax exposures are discussed below.
AstraZeneca faces a number of transfer pricing audits in jurisdictions around
the world and, in some cases, is in dispute with the tax authorities. The issues
under discussion are often complex and can require many years to resolve.
Accruals for tax contingencies require management to make estimates and
judgements with respect to the ultimate outcome of a tax audit, and actual
results could vary from these estimates. The international tax environment
presents increasingly challenging dynamics for the resolution of transfer
pricing disputes. These disputes usually result in taxable profits being
increased in one territory and correspondingly decreased in another. Our
balance sheet positions for these matters reflect appropriate corresponding
relief in the territories affected. Management considers that at present such
corresponding relief will be available but given the challenges in the
international tax environment will keep this aspect under careful review. The
total net accrual included in the financial statements to cover the worldwide
exposure to transfer pricing audits is $1,322 million, an increase of $327
million due to a number of new audits, revisions of estimates relating to
existing audits, offset by a number of negotiated settlements. For transfer
pricing audits where AstraZeneca and the tax authorities are in dispute,
AstraZeneca estimates the potential for reasonably possible additional losses
above and beyond the amount provided to be up to $400 million; however,
management believes that it is unlikely that these additional losses will arise.
Of the remaining tax exposures, the Company does not expect material additional
losses. It is not possible to estimate the timing of tax cash flows in relation
to each outcome, however, it is anticipated that a number of significant
disputes may be resolved over the next 1-2 years. Included in the provision is
an amount of interest of $234 million. Interest is accrued as a tax expense.
6 FULL YEAR TERRITORIAL SALES ANALYSIS
% Growth
Full Year Full Year
2007 2006 Constant
$m $m Actual Currency
US 13,366 12,449 7 7
Canada 1,145 1,031 11 5
North America 14,511 13,480 8 7
Western Europe** 9,115 8,073 13 3
Japan 1,661 1,503 11 11
Other Established ROW 715 555 29 15
Established ROW* 11,491 10,131 13 5
Emerging Europe 1,028 831 24 12
China 437 328 33 28
Emerging Asia Pacific 749 646 16 10
Other Emerging ROW 1,343 1,059 27 21
Emerging ROW 3,557 2,864 24 17
Total Sales 29,559 26,475 12 7
* Established ROW comprises Western Europe (including France, UK, Germany,
Italy, Sweden and others), Japan, Australia and New Zealand.
** For the full year, Western Europe sales growth excluding SynagisTM would be
11 percent on an actual basis and 1 percent on a constant currency basis.
7 FOURTH QUARTER TERRITORIAL SALES ANALYSIS
% Growth
4th Quarter 4th Quarter
2007 2006 Constant
$m $m Actual Currency
US 3,665 3,390 8 8
Canada 331 263 26 10
North America 3,996 3,653 9 8
Western Europe*** 2,453 2,143 14 3
Japan 532 442 20 15
Other Established ROW 209 160 31 14
Established ROW* 3,194 2,745 16 5
Emerging Europe 293 216 36 17
China 124 87 43 36
Emerging Asia Pacific 204 180 13 6
Other Emerging ROW 359 273 32 22
Emerging ROW 980 756 30 18
Total Sales 8,170 7,154 14 8
* Established ROW comprises Western Europe (including France, UK, Germany,
Italy, Sweden and others), Japan, Australia and
New Zealand.
*** For the fourth quarter, Western Europe sales growth excluding SynagisTM
would be 10 percent on an actual basis and -2 percent on a constant currency
basis.
8 FULL YEAR PRODUCT SALES ANALYSIS
World US
Full Year Full Year Actual Constant Full Year Actual
2007 2006 Growth Currency 2007 Growth
$m $m % Growth $m %
%
Gastrointestinal:
Nexium 5,216 5,182 1 (2) 3,383 (4)
Losec/Prilosec 1,143 1,371 (17) (20) 226 (3)
Others 84 78 8 3 30 25
Total Gastrointestinal 6,443 6,631 (3) (6) 3,639 (4)
Cardiovascular:
Crestor 2,796 2,028 38 33 1,424 24
Seloken/Toprol-XL 1,438 1,795 (20) (22) 969 (30)
Atacand 1,287 1,110 16 9 259 -
Tenormin 308 320 (4) (8) 19 (21)
Zestril 295 307 (4) (10) 18 (36)
Plendil 271 275 (1) (7) 35 46
Others 291 283 2 (5) 2 (33)
Total Cardiovascular 6,686 6,118 9 5 2,726 (5)
Respiratory:
Symbicort 1,575 1,184 33 22 50 n/m
Pulmicort 1,454 1,292 13 10 964 15
Rhinocort 354 360 (2) (4) 229 (9)
Oxis 86 88 (2) (10) - -
Accolate 76 81 (6) (7) 55 (7)
Others 166 146 14 5 - -
Total Respiratory 3,711 3,151 18 12 1,298 13
Oncology:
Arimidex 1,730 1,508 15 10 694 13
Casodex 1,335 1,206 11 6 298 1
Zoladex 1,104 1,008 10 4 92 (14)
Iressa 238 237 - - 9 (44)
Ethyol 43 - n/m n/m 43 n/m
Others 369 303 22 18 166 37
Total Oncology 4,819 4,262 13 8 1,302 13
Neuroscience:
Seroquel 4,027 3,416 18 15 2,863 15
Local anaesthetics 557 529 5 (1) 45 (41)
Zomig 434 398 9 5 177 5
Diprivan 263 304 (13) (17) 40 (53)
Others 59 57 4 (2) 15 -
Total Neuroscience 5,340 4,704 14 10 3,140 11
Infection and Other:
Synagis 618 - n/m n/m 449 n/m
Merrem 773 604 28 20 149 32
FluMist 53 - n/m n/m 53 n/m
Other Products 270 271 - (4) 148 6
Total Infection and Other 1,714 875 96 89 799 217
Aptium Oncology 402 374 7 7 402 7
Astra Tech 444 360 23 14 60 46
Total 29,559 26,475 12 7 13,366 7
9 FOURTH QUARTER PRODUCT SALES ANALYSIS
World US
4th 4th Constant 4th
Quarter Quarter Actual Currency Quarter Actual
2007 2006 Growth Growth 2007 Growth
$m $m % % $m %
Gastrointestinal:
Nexium 1,303 1,430 (9) (12) 815 (18)
Losec/Prilosec 298 347 (14) (20) 58 (25)
Others 24 24 - (4) 9 (10)
Total Gastrointestinal 1,625 1,801 (10) (14) 882 (18)
Cardiovascular:
Crestor 799 625 28 21 386 8
Seloken/Toprol-XL 209 387 (46) (50) 86 (69)
Atacand 353 301 17 7 66 (3)
Tenormin 84 82 2 (5) 5 -
Zestril 67 78 (14) (22) 2 (71)
Plendil 66 65 2 (6) 7 75
Others 78 71 10 - - (100)
Total Cardiovascular 1,656 1,609 3 (4) 552 (23)
Respiratory:
Symbicort 436 323 35 21 16 n/m
Pulmicort 447 400 12 8 307 13
Rhinocort 87 90 (3) (7) 55 (13)
Oxis 22 23 (4) (13) - -
Accolate 19 22 (14) (18) 14 (18)
Others 45 41 10 - - -
Total Respiratory 1,056 899 17 10 392 12
Oncology:
Arimidex 474 412 15 8 187 7
Casodex 370 327 13 6 78 (5)
Zoladex 307 272 13 4 24 (11)
Iressa 70 63 11 6 2 (50)
Ethyol 16 - n/m n/m 16 n/m
Others 102 83 23 17 44 22
Total Oncology 1,339 1,157 16 8 351 9
Neuroscience:
Seroquel 1,086 912 19 15 770 16
Local anaesthetics 159 133 20 9 13 18
Zomig 114 103 11 4 44 7
Diprivan 74 79 (6) (13) 11 (50)
Others 16 13 23 15 4 100
Total Neuroscience 1,449 1,240 17 12 842 14
Infection and Other:
Synagis 480 - n/m n/m 391 n/m
Merrem 215 167 29 18 42 45
FluMist 53 - n/m n/m 53 n/m
Other Products 68 81 (16) (22) 39 (7)
Total Infection and Other 816 248 229 220 525 639
Aptium Oncology 102 98 4 4 102 4
Astra Tech 127 102 25 14 19 73
Total 8,170 7,154 14 8 3,665 8
Convenience Translation of Key Financial Information
2007 2006 2007 2006 2007 2006
For the quarter ended 31 December $m $m £m £m SEKm SEKm
Total Sales 8,170 7,154 4,099 3,589 52,330 45,822
Operating profit 1,929 2,003 968 1,005 12,355 12,829
Profit before tax 1,837 2,103 922 1,055 11,766 13,470
Net profit for the period 1,275 1,445 640 725 8,167 9,255
Earnings per Ordinary Share $0.86 $0.93 £0.43 £0.47 SEK5.51 SEK5.96
2007 2006 2007 2006 2007 2006
For the year ended 31 December $m $m £m £m SEKm SEKm
Total Sales 29,559 26,475 14,830 13,283 189,328 169,575
Operating profit 8,094 8,216 4,061 4,122 51,843 52,624
Profit before tax 7,983 8,543 4,005 4,286 51,132 54,719
Net profit for the year 5,627 6,063 2,823 3,042 36,041 38,834
Earnings per Ordinary Share $3.74 $3.86 £1.88 £1.94 SEK23.96 SEK24.72
Dividend per Ordinary Share $1.87 $1.72 £0.93 £0.90 SEK12.10 SEK12.20
Net cash inflow from operating
activities 7,510 7,693 3,768 3,860 48,102 49,274
(Decrease)/increase in cash & (1,326) 2,055 (665) 1,031 (8,493) 13,162
cash equivalents
Capital and Reserves 14,778 15,304 7,414 7,678 94,655 98,024
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= £0.501718 and $1= SEK6.405100 respectively. Dividend per Ordinary Share is
shown as the actual amount payable using the rates at the date of declaration of
the dividend.
Shareholder Information
ANNOUNCEMENTS AND MEETINGS
Announcement of first quarter 2008 results 24 April 2008
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
The record date for the first interim dividend payable on 17 September 2007 (in
the UK, Sweden and the US) was 10 August 2007. Ordinary shares were traded
ex-dividend on the London and Stockholm Stock Exchanges from 8 August 2007.
ADRs traded ex-dividend on the New York Stock Exchange from the same date.
The record date for the second interim dividend for 2007 payable on 17 March
2008 (in the UK, Sweden and the US) will be 8 February 2008. Ordinary shares
will trade ex-dividend on the London and Stockholm Stock Exchanges from 6
February 2008. ADRs will trade ex-dividend on the New York Stock Exchange from
the same date.
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 this preliminary announcement are trademarks
of the AstraZeneca Group of companies:
Accolate Arimidex Astra Tech Atacand Casodex Crestor Diprivan Ethyol
Faslodex FluMist Iressa Losec Merrem Nexium Nolvadex Oxis Plendil
Prilosec Pulmicort Pulmicort Respules Rhinocort Seloken Seroquel Seroquel
XR Symbicort Symbicort SMART Synagis Tenormin Toprol-XL 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:
This preliminary announcement contains 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
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