Interim Results (Part 2 of 3)
AstraZeneca PLC
26 July 2007
Consolidated Income Statement
2007 2006
For the six months ended 30 June $m $m
Sales 14,239 12,805
Cost of sales (3,154) (2,642)
Distribution costs (122) (112)
Research and development (2,395) (1,816)
Selling, general and administrative costs (4,822) (4,405)
Other operating income and expense 397 277
Operating profit 4,143 4,107
Finance income 486 400
Finance expense (371) (254)
Profit before tax 4,258 4,253
Taxation (1,257) (1,227)
Profit for the period 3,001 3,026
Attributable to:
Equity holders of the Company 2,986 3,024
Minority interests 15 2
3,001 3,026
Basic earnings per $0.25 Ordinary Share $1.97 $1.92
Diluted earnings per $0.25 Ordinary Share $1.97 $1.91
Weighted average number of Ordinary Shares in issue (millions) 1,515 1,577
Diluted average number of Ordinary Shares in issue (millions) 1,518 1,581
Dividends declared in the period 1,885 1,453
Consolidated Income Statement
2007 2006
For the quarter ended 30 June $m $m
Sales 7,273 6,625
Cost of sales (1,668) (1,391)
Distribution costs (61) (58)
Research and development (1,225) (955)
Selling, general and administrative costs (2,605) (2,290)
Other operating income and expense 259 200
Operating profit 1,973 2,131
Finance income 239 199
Finance expense (221) (121)
Profit before tax 1,991 2,209
Taxation (554) (607)
Profit for the period 1,437 1,602
Attributable to:
Equity holders of the Company 1,426 1,599
Minority interests 11 3
1,437 1,602
Basic earnings per $0.25 Ordinary Share $0.95 $1.02
Diluted earnings per $0.25 Ordinary Share $0.95 $1.01
Weighted average number of Ordinary Shares in issue (millions) 1,503 1,575
Diluted average number of Ordinary Shares in issue (millions) 1,506 1,580
Consolidated Balance Sheet
As at As at 31 As at
30 June December 30 June
2007 2006 2006
$m $m $m
ASSETS
Non-current assets
Property, plant and equipment 8,161 7,453 7,269
Intangible assets, including goodwill 21,421 4,204 4,609
Other investments 604 119 125
Deferred tax assets 1,336 1,220 1,405
31,522 12,996 13,408
Current assets
Inventories 2,563 2,250 2,211
Trade and other receivables 6,260 5,561 5,471
Other investments 360 657 1,020
Income tax receivable 1,944 1,365 273
Cash and cash equivalents 4,951 7,103 6,076
16,078 16,936 15,051
Total assets 47,600 29,932 28,459
LIABILITIES
Current liabilities
Interest bearing loans and borrowings (14,342) (136) (85)
Trade and other payables (7,179) (6,334) (6,572)
Income tax payable (3,412) (2,977) (1,748)
(24,933) (9,447) (8,405)
Non-current liabilities
Interest bearing loans and borrowings (1,057) (1,087) (1,046)
Deferred tax liabilities (4,235) (1,559) (1,775)
Retirement benefit obligations (1,541) (1,842) (1,582)
Provisions (633) (327) (317)
Other payables (234) (254) (325)
(7,700) (5,069) (5,045)
Total liabilities (32,633) (14,516) (13,450)
Net assets 14,967 15,416 15,009
EQUITY
Capital and reserves attributable to equity holders of
the Company
Share capital 374 383 392
Share premium account 1,799 1,671 1,433
Other reserves 1,911 1,902 1,851
Retained earnings 10,763 11,348 11,234
14,847 15,304 14,910
Minority equity interests 120 112 99
Total equity 14,967 15,416 15,009
Consolidated Cash Flow Statement
For the six months ended 30 June 2007 2006
$m $m
Cash flows from operating activities
Profit before taxation 4,258 4,253
Finance income and expense (115) (146)
Depreciation, amortisation and impairment 739 588
Increase in working capital (589) (352)
Other non-cash movements 427 115
Cash generated from operations 4,720 4,458
Interest paid (61) (30)
Tax paid (1,475) (1,007)
Net cash inflow from operating activities 3,184 3,421
Cash flows from investing activities
Acquisition of businesses* (14,543) (213)
Movement in short term investments and fixed deposits* 572 701
Purchase of property, plant and equipment (487) (373)
Disposal of property, plant and equipment 27 16
Purchase of intangible assets (268) (331)
Purchase of non-current asset investments (6) (15)
Disposal of non-current asset investments - 54
Interest received 221 154
Dividends paid by subsidiaries to minority interest (9) (4)
Net cash outflow from investing activities (14,493) (11)
Net cash (outflow)/inflow before financing activities* (11,309) 3,410
Cash flows from financing activities
Proceeds from issue of share capital 128 746
Repurchase of shares (2,160) (1,627)
Dividends paid (1,878) (1,442)
Repayment of loans (838) -
Movement in short term borrowings 13,913 -
Net cash inflow/(outflow) from financing activities 9,165 (2,323)
Net (decrease)/increase in cash and cash equivalents in the (2,144) 1,087
period
Cash and cash equivalents at the beginning of the period 6,989 4,895
Exchange rate effects 26 16
Cash and cash equivalents at the end of the period 4,871 5,998
Cash and cash equivalents consists of:
Cash and cash equivalents 4,951 6,076
Overdrafts (80) (78)
4,871 5,998
Note: Free Cash Flow (*) of $2,662 million (2006: $2,922 million) is calculated
as; net cash (outflow)/inflow before financing activities, adjusted for:
acquisition of businesses, movements in short term investments and fixed
deposits.
Consolidated Statement of Recognised Income and Expense
2007 2006
For the six months ended 30 June $m $m
Profit for the period 3,001 3,026
Foreign exchange adjustments on consolidation 149 454
Available for sale losses taken to equity (14) (20)
Actuarial gains for the period 352 119
Tax on items taken directly to reserves (90) 23
397 576
Total recognised income and expense for the period 3,398 3,602
Attributable to:
Equity holders of the Company 3,390 3,597
Minority interests 8 5
3,398 3,602
Independent review report to AstraZeneca PLC
Introduction
We have been instructed by the Company to review the financial information
comprising the consolidated income statement, balance sheet, cash flow statement
and statement of recognised income and expense for the six months ended and as
at 30 June 2007 and notes 1 to 5 (set out on pages 17, 19, 20, 21 and 23 to 29
respectively). We have read the other information contained in the interim
report and considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the Listing
Rules of the Financial Services Authority. Our review has been undertaken so
that we might state to the Company those matters we are required to state to it
in this report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the Company for
our review work, for this report, or for the conclusions we have reached.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the Directors. The Directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual Financial Statements except
where any changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
- Review of interim financial information issued by the Auditing Practices Board
for use in the UK. A review consists principally of making enquiries of group
management and applying analytical procedures to the financial information and
underlying financial data and, based thereon, assessing whether the accounting
policies and presentation have been consistently applied unless otherwise
disclosed. A review excludes audit procedures such as tests of controls and
verification of assets, liabilities and transactions. It is substantially less
in scope than an audit performed in accordance with International Standards on
Auditing (UK and Ireland) and therefore provides a lower level of assurance than
an audit. Accordingly, we do not express an audit opinion on the financial
information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2007.
KPMG Audit Plc
Chartered Accountants
8 Salisbury Square, London
26 July 2007
Notes to the Interim Financial Statements
1 BASIS OF PREPARATION AND ACCOUNTING POLICIES
The unaudited financial statements for the six months ended 30 June 2007 have
been prepared in accordance with International Accounting Standards and
International Financial Reporting Standards (collectively 'IFRS') as adopted by
the European Union (EU). Details of the accounting policies applied are those
set out in AstraZeneca PLC's Annual Report and Form 20-F Information 2006.
These condensed consolidated interim financial statements have been prepared in
accordance with International Financial Reporting Standard (IFRS) IAS 34 -
Interim Financial Reporting. They do not include all of the information
required for full annual financial statements, and should be read in conjunction
with the consolidated financial statements of the Group as at and for the year
ended 31 December 2006.
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.
These interim financial statements do not constitute statutory accounts of the
Group within the meaning of Section 240 of the Companies Act 1985. Statutory
accounts for the year ended 31 December 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.
At 1 Jan Cash Acquisitions Non-cash Exchange At 30 June
2007 flow movements movements 2007
$m $m $m $m $m $m
Loans due after 1 year (1,087) - - 30 - (1,057)
Current instalments of - 838 (1,165) - - (327)
loans
Total loans (1,087) 838 (1,165) 30 - (1,384)
Other investments - 657 (572) 279 (6) 2 360
current
Cash and cash equivalents 7,103 (2,178) - - 26 4,951
Overdrafts (114) 34 - - - (80)
Short term borrowings (22) (13,913) - - - (13,935)
7,624 (16,629) 279 (6) 28 (8,704)
Net funds/(debt) 6,537 (15,791) (886) 24 28 (10,088)
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 to be 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 $24 million of turnover in the month since
acquisition. After amortisation, net investments/interest costs (including
interest costs of external financing of $52 million) and tax, the loss
attributable to the MedImmune acquisition was $91 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 six month period would have been $14,807 million, $3,851
million and $2,725 million, respectively. Basic and diluted Earnings per Share
for the combined Group would have been $1.80. 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 8,136 8,329
Property, plant and equipment 523 70 593
Other 550 (17) 533
1,266 8,189 9,455
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 (2,787) (2,473)
(924) (2,787) (3,711)
Total assets acquired 1,455 3,832 5,287
Goodwill 8,596
Total consideration for outstanding shares* 13,883
Additional payments related to convertible
debt, share options and other acquisition
obligations 1,770
Less: amounts paid after 30 June 2007 (283)
Less: cash acquired (979)
Net cash outflow 14,391
* The total consideration for outstanding shares includes $29m of directly
attributable costs.
4 RESTRUCTURING COSTS
Profit before tax for the six months ended 30 June 2007 is stated after charging
restructuring costs of $458 million in the six month period. These have been
charged to the income statement as follows:
$m
Cost of Sales 281
R&D 29
SG&A 148
Total 458
5 LEGAL PROCEEDINGS and contingent liabilities
AstraZeneca (including the recently acquired MedImmune, Inc.) is involved in
various legal proceedings considered typical to its businesses, including
litigation relating to employment matters, product liability, commercial
disputes, infringement of intellectual property rights, the validity of certain
patents and securities law. The matters discussed below constitute the more
significant developments since the Form 20-F filing in respect of the fiscal
year ended 31 December 2006 as filed with the SEC on 27 March 2007 and should be
read in conjunction with the financial statements included therein.
Unless noted otherwise, no provisions have been established in respect of the
claims discussed below.
Matters previously disclosed in respect of the first quarter of 2007 and April
2007
Seroquel(TM)(quetiapine fumarate)
In March 2007, AstraZeneca received a notice from Sandoz, Inc. that Sandoz had
submitted an Abbreviated New Drug Application (ANDA) for quetiapine fumarate
25mg tablets. AstraZeneca's patent covering Seroquel(TM)tablets is listed in the
FDA's Orange Book. The Sandoz notice contained a Paragraph IV certification
alleging non-infringement and patent invalidity in respect of AstraZeneca's
listed patent covering Seroquel(TM). Sandoz is the second generic drug
manufacturer to submit an ANDA containing a Paragraph IV certification and
seeking approval to market a 25mg quetiapine fumarate tablet. As disclosed in
November 2005, Teva Pharmaceuticals USA submitted the first ANDA seeking
approval to market 25mg quetiapine fumarate tablets and notifying AstraZeneca of
an ANDA submission to the FDA containing a Paragraph IV certification. In
February 2006, Teva supplemented its ANDA to seek approval to market 100, 200
and 300mg quetiapine fumarate tablets.
In April 2007, AstraZeneca filed a patent infringement lawsuit in the U.S.
Federal District Court, District of New Jersey, against Sandoz for patent
infringement in respect of its 25mg ANDA product. Currently pending in the U.S.
Federal District Court, District of New Jersey, is AstraZeneca's consolidated
ANDA patent infringement action relating to Teva's ANDA for 25, 100, 200 and
300mg quetiapine fumarate tablets.
In January 2007, Teva sought leave to amend its responsive pleadings in
AstraZeneca's consolidated lawsuit against Teva to add allegations, defences and
counter-claims directed to AstraZeneca's alleged inequitable conduct in the
procurement of its patent. AstraZeneca did not object to the Court granting
leave to amend and, in March 2007, the Court allowed Teva to amend its
pleadings. Later, in March 2007, AstraZeneca filed a responsive pleading denying
or contesting Teva's amended pleadings.
Government Investigation
AstraZeneca, along with several other manufacturers, has received a letter from
the Committee on Oversight and Government Reform of the U.S. House of
Representatives as part of the Committee's ongoing oversight of the
pharmaceutical industry's research and marketing practices. The Committee has
requested that AstraZeneca provide clinical and marketing information relating
to Seroquel(TM). AstraZeneca is co-operating with the Committee's enquiry.
Crestor(TM)(rosuvastatin)
As previously disclosed, AstraZeneca Pharmaceuticals LP and/or AstraZeneca LP in
the US were served with seven individual lawsuits in 2004 and 2005 involving
alleged injury in association with the use of Crestor(TM). Five of these lawsuits
have now been dismissed. In addition, a motion for authorisation to institute a
class action and to be a representative was filed in Quebec, Canada against
AstraZeneca PLC and AstraZeneca Canada Inc., in which the petitioner alleged
injury as a result of the use of Crestor(TM). This matter was dismissed in March
2007. During 2006, AstraZeneca was served with six additional individual
lawsuits in the US, all of which have since been dismissed. AstraZeneca is
vigorously defending all the remaining actions.
Matters disclosed in respect of the second quarter of 2007 and July 2007
Atacand(TM)(candesartan cilexetil)
In April 2007, AstraZeneca (NDA holder) and Takeda (patent holder) received
notice from Sandoz Inc. that Sandoz had filed an ANDA with the FDA, seeking
approval to market a generic version of Atacand(TM)(candesartan cilexetil) in the
4, 8, 16 and 32 mg doses, prior to the expiration in July 2013 of US Patent No.
5534534 (the '534 Patent). The notification claims that the Sandoz product does
not infringe the '534 Patent. Sandoz did not challenge the compound patents
listed in the FDA Orange Book with reference to AtacandTM, the latter of which
expires in June 2012. As a result Sandoz cannot market candesartan cilexetil
until the end of the exclusivity period afforded by these patents. AstraZeneca
and Takeda have decided not to bring an action for patent infringement at this
time.
LosecTM/Prilosec(TM)(omeprazole)
In May 2007, the United States District Court for the Southern District of New
York upheld both AstraZeneca formulation patents covering PrilosecTM
(omeprazole), a ruling consistent with the previously disclosed decision in the
first wave case in October 2002. The Court found that the generic omeprazole
formulations of Impax Laboratories Inc. and Apotex (Apotex Corp. and Apotex
Inc.) infringed both patents in suit. AstraZeneca is seeking appropriate
relief, including damages. The Court also found that the generic omeprazole
products sold by Lek Pharmaceutical and Chemical Company d.d. and Mylan
Pharmaceuticals Inc./Esteve did not infringe. AstraZeneca has appealed the
Mylan/Esteve decision to the US Court of Appeals for the Federal Circuit.
In June 2007, AstraZeneca received a notice from Dr. Reddy's Laboratories, Ltd.
and from Dr. Reddy's Laboratories, Inc. (Dr. Reddy's) that Dr. Reddy's had
submitted an ANDA seeking FDA approval to market a 20mg delayed release
omeprazole magnesium capsule for the over-the-counter (OTC) market. Dr. Reddy's
seeks approval to market a generic omeprazole OTC product before the expiration
of the patents listed in the FDA Orange Book in reference to the Prilosec(TM)OTC
product that is marketed by Procter & Gamble. AstraZeneca is evaluating Dr.
Reddy's notice.
Nexium(TM)(esomeprazole magnesium)
On 13 June 2007, Florida's appellate court affirmed the dismissal of the
previously disclosed Nexium(TM)consumer litigation pending in Florida. The
plaintiff has filed a petition in the Florida Supreme Court for discretionary
review.
The European patent protecting the formulation of the Nexium(TM)MUPS product is
under oppostition with the European Patent Office (EPO) and an Opposition
Division oral hearing is scheduled for November 2007. The patent is opposed by
the generic companies ratiopharm, Hexal, Teva and Krka.
Nolvadex(TM)(tamoxifen)
As previously disclosed, since 2000, AstraZeneca has been a co-defendant with
Barr Laboratories in numerous purported class actions filed in federal and state
courts throughout the United States in which the plaintiffs alleged that they
paid 'supra-competitive and monopolistic prices' for tamoxifen as a result of
the settlement of patent litigation between Zeneca and Barr in 1993. All of the
state court actions were removed to federal court and were consolidated, along
with all of the cases originally filed in the federal courts, in a federal
multi-district litigation proceeding pending in the US District Court for the
Eastern District of New York. In May 2003, the US District Court for the
Eastern District of New York granted AstraZeneca's motion to dismiss. In
November 2005, the US Court of Appeals for the Second Circuit affirmed the
District Court's decision. The plaintiffs thereafter filed a writ of certiorari
with the United States Supreme Court to request that the Court hear an appeal of
the Second Circuit's decision. In June 2007, the US Supreme Court denied the
Plaintiffs' writ.
Seroquel(TM)(quetiapine fumarate)
As previously disclosed, AstraZeneca Pharmaceuticals LP, either alone or in
conjunction with one or more affliliates, has been sued in numerous individual
personal injury actions involving Seroquel(TM). In the overwhelming majority of
these cases, the nature of the plaintiffs' alleged injuries is not clear.
Although some plaintiffs contend that they developed diabetes and/or other
related injuries as a result of taking Seroquel(TM)and/or other atypical
anti-psychotic medications; in most instances, little or no factual information
regarding the alleged injury has been provided.
As of 26 June 2007, AstraZeneca was defending 5,839 served or answered lawsuits
involving approximately 10,000 plaintiff groups. To date, about 645 cases have
been dismissed. Discovery directed to all parties is ongoing in the SeroquelTM
cases. AstraZeneca intends to vigorously defend all these Seroquel(TM)cases.
As referred to above, patent litigation concerning Teva Pharmaceuticals USA's
currently pending ANDA, which seeks FDA approval to market generic 25, 100, 200
and 300 mg quetiapine fumarate tablets, is proceeding in US Federal District
Court, District of New Jersey. In June 2007, AstraZeneca received a Paragraph IV
certification notice from Teva that it had supplemented its currently pending
ANDA with a request for FDA approval to additionally market generic 50, 150 and
400 mg quetiapine fumarate tablets. In June 2007, AstraZeneca filed a patent
infringement lawsuit in respect of Teva's ANDA supplementation for 50, 150 and
400 mg tablets in US Federal District Court, District of New Jersey. In July
2007, Teva filed a responsive pleading including counterclaims for declaratory
judgements of invalidity and unenforceability due to alleged inequitable
conduct.
In May 2007, Sandoz, Inc. filed responsive pleadings in AstraZeneca's patent
infringement action in respect of Sandoz's 25 mg quetiapine fumarate tablets. In
June 2007, AstraZeneca filed its reply pleadings answering Sandoz's
counterclaims.
In May 2007, the New Jersey Ironworkers Local Union No. 68 filed a class action
suit against AstraZeneca on behalf of all individuals and non-governmental
entities that paid for Seroquel(TM)from January 2000 to date. The lawsuit is
filed in the Federal District Court in New Jersey and alleges that AstraZeneca
promoted Seroquel(TM)for off-label uses and misled class members into believing
that Seroquel(TM)was superior to other, lower-cost alternative medicines. Two
similar class action lawsuits were filed in June in New Jersey and Pennsylvania
Federal Courts. The Company believes these suits to be without merit and
intends to vigorously defend the claims.
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 antipsychotics 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 programmes for
prescriptions written as a result of the alleged off-label promotion. Although
no other similar lawsuits have been brought by states other than Pennsylvania,
the Company has been informed that the Attorney General's Offices of multiple
other states have investigations looking into similar Seroquel(TM)off-label
issues. AstraZeneca has signed agreements with the states of South Carolina and
Ohio tolling the statutes of limitations on potential claims, and has been
approached by additional states for similar tolling agreements. The Company
believes these claims to be without merit and intends to vigorously defend the
Pennsylvania lawsuit.
Symbicort(TM)(budesonide/formoterol)
As previously disclosed, in March 2005 the EPO ruled that the European patent
covering the combination of formoterol and budesonide in Symbicort(TM)is valid.
This ruling was appealed by Norton Healthcare Ltd, Miat Spa, Generics (UK) Ltd
and Liconsa SA. A Board of Appeal hearing is scheduled for October 2007.
Toprol-XL(TM)(metoprolol succinate)
In July 2007, the Court of Appeals for the Federal Circuit responded to
AstraZeneca's appeal of the January 2006 ruling from the US District court for
the Eastern District of Missouri. The appeals court reversed the District
Court's finding that the patents were unenforceable due to inequitable conduct,
finding that the District Court erred in finding inequitable conduct on summary
judgment where there were material facts in dispute. However, the Federal
circuit, in a 2-1 decision, affirmed the District Court's finding of invalidity
of the '154 patent due to double patenting. AstraZeneca is considering whether
to request reconsideration of the holding of invalidity by the Federal Circuit
en banc.
In June 2007, AstraZeneca received a notice from Dr. Reddy's that it had
submitted an ANDA to the US FDA for metoprolol succinate extended-release
tablets, 100mg and 200mg (KV Pharmaceuticals previously submitted an ANDA on
the same dose forms which has received final approval by FDA). Dr. Reddy's is
seeking FDA approval to market a generic metoprolol succinate product prior to
the expiration of some but not all of the patents listed in the FDA Orange Book
in reference to Toprol-XL(TM). AstraZeneca is currently evaluating Dr. Reddy's
ANDA to determine whether or not to file a complaint for patent infringement.
Dr. Reddy's notice did not challenge the '154 patent. AstraZeneca's
exclusivity relating to this patent expires in March 2008, unless it is
terminated earlier as a result of the outcome of the above-referenced appeal.
Because AstraZeneca has not received notice from Dr. Reddy's as to this US
patent, Dr. Reddy's cannot market generic metoprolol succinate until the end of
the exclusivity afforded this patent. AstraZeneca reserves the right to enforce
all patents related to Toprol-XL(TM).
Zestril(TM)(lisinopril)
As previously disclosed, AstraZeneca and Merck were involved in a patent
infringement action in the Federal Court of Canada against Apotex Inc. regarding
infringement of Merck's lisinopril patent. In April 2006 the Federal Court of
Canada ruled in favour of AstraZeneca and Merck on the key issues, and this
decision was upheld by the Federal Court of Appeal in Canada in October 2006,
dismissing Apotex's appeal.
In December 2006 Apotex sought leave to appeal to the Supreme Court of Canada.
The Supreme Court of Canada dismissed Apotex's leave to appeal in May 2007.
Average wholesale price class action litigation
As previously disclosed, the District Court in Boston 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: (Class1) a 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 Zoladex(TM)(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
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.
Provisions in respect of these costs have been made.
In June 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
Zoladex(TM)during the period 1998 through 2003. The Court awarded damages
against AstraZeneca of $4.5 million on Class 3, and requested additional
information from plaintiffs before awarding damages on Class 2. Damages on
Class 2 are likely to be in the region of $2.2 million. AstraZeneca believes
the decision to be in error and intends to appeal.
Separately, MedImmune is also involved in various lawsuits brought by various
states and counties in the United States alleging manipulation of average
wholesale prices by several defendants, including MedImmune. These were
disclosed as part of MedImmune's Annual Report on Form 10-K for the fiscal year
ended 31 December 2006 filed with the U.S. Securities and Exchange Commission.
During the first half of 2007, there were no material changes to the status of
these lawsuits, except that in April 2007 MedImmune was served with a complaint
filed by the County of Orange, New York.
Taxation
As previously disclosed in the Annual Report and Form 20-F Information 2006, the
international tax environment presents increasingly challenging dynamics in
terms of transfer pricing dispute settlements. Our balance sheet positions for
transfer pricing 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.
6 HALF YEAR TERRITORIAL SALES ANALYSIS
% Growth
1st Half 1st Half Actual Constant
2007 2006 Currency
$m $m
US 6,502 5,959 9 9
Canada 528 513 3 2
North America 7,030 6,472 9 9
Western Europe 4,462 3,998 12 3
Japan 734 691 6 10
Other Established ROW 310 252 23 13
Established ROW* 5,506 4,941 11 4
Emerging Europe 494 429 15 9
China 201 156 29 25
Emerging Asia Pacific 356 308 16 10
Other Emerging ROW 652 499 31 27
Emerging ROW 1,703 1,392 22 17
Total Sales 14,239 12,805 11 8
* Established ROW comprises Western Europe (including France, UK, Germany,
Italy, Sweden and others), Japan, Australia and New Zealand.
7 SECOND QUARTER TERRITORIAL SALES ANALYSIS
% Growth
2nd Quarter 2nd Quarter Actual Constant
2007 2006 Currency
$m $m
US 3,268 3,077 6 6
Canada 274 263 4 2
North America 3,542 3,340 6 6
Western Europe 2,262 2,064 10 1
Japan 403 387 4 8
Other Established ROW 177 135 31 18
Established ROW* 2,842 2,586 10 3
Emerging Europe 248 191 30 19
China 109 84 30 25
Emerging Asia Pacific 187 159 18 13
Other Emerging ROW 345 265 30 26
Emerging ROW 889 699 27 21
Total Sales 7,273 6,625 10 6
* Established ROW comprises Western Europe (including France, UK, Germany,
Italy, Sweden and others), Japan, Australia and New Zealand.
8 HALF YEAR PRODUCT SALES ANALYSIS
World US
1st 1st Actual Constant 1st Actual
Half Half Growth Currency Half Growth
2007 2006 Growth 2007
$m $m % % $m %
Gastrointestinal:
Nexium 2,620 2,472 6 4 1,717 4
Losec/Prilosec 577 700 (18) (20) 114 14
Others 40 33 21 15 13 160
Total Gastrointestinal 3,237 3,205 1 (1) 1,844 5
Cardiovascular:
Crestor 1,306 867 51 47 696 42
Seloken/Toprol-XL 901 934 (4) (5) 670 (8)
Atacand 614 530 16 10 128 5
Tenormin 151 161 (6) (9) 10 (23)
Zestril 156 153 2 (3) 13 -
Plendil 139 142 (2) (7) 20 67
Others 141 143 (1) (7) 1 (50)
Total Cardiovascular 3,408 2,930 16 13 1,538 11
Respiratory:
Symbicort 768 585 31 22 30 n/m
Pulmicort 721 629 15 12 473 19
Rhinocort 187 187 - (2) 125 (5)
Oxis 46 44 5 (2) - -
Accolate 38 39 (3) (3) 28 4
Synagis 16 - n/m n/m 2 n/m
FluMist - - - - - -
Others 82 72 14 7 - -
Total Respiratory 1,858 1,556 19 14 658 18
Oncology:
Arimidex 831 714 16 12 340 20
Casodex 641 580 11 7 148 6
Zoladex 524 481 9 5 45 (13)
Iressa 113 112 1 2 5 (38)
Ethyol 8 - n/m n/m 8 n/m
Others 174 142 23 20 80 51
Total Oncology 2,291 2,029 13 9 626 17
Neuroscience:
Seroquel 1,886 1,656 14 12 1,333 10
Local anaesthetics 269 272 (1) (6) 22 (55)
Zomig 213 196 9 5 89 3
Diprivan 125 161 (22) (25) 19 (63)
Others 27 29 (7) (10) 6 (25)
Total Neuroscience 2,520 2,314 9 6 1,469 5
Infection and Other:
Merrem 372 284 31 24 70 37
Other Products 140 133 5 (2) 70 9
Total Infection and Other 512 417 23 16 140 22
Aptium Oncology 200 181 10 10 200 10
Astra Tech 213 173 23 14 27 42
Total 14,239 12,805 11 8 6,502 9
9 SECOND QUARTER PRODUCT SALES ANALYSIS
World US
2nd 2nd Constant 2nd
Quarter Quarter Actual Currency Quarter Actual
2007 2006 Growth Growth 2007 Growth
$m $m % % $m %
Gastrointestinal:
Nexium 1,312 1,283 2 - 855 (1)
Losec/Prilosec 298 356 (16) (19) 60 33
Others 20 15 33 27 6 n/m
Total Gastrointestinal 1,630 1,654 (1) (4) 921 1
Cardiovascular:
Crestor 678 480 41 38 353 30
Seloken/Toprol-XL 457 478 (4) (6) 339 (10)
Atacand 318 276 15 9 63 (2)
Tenormin 80 85 (6) (8) 5 (17)
Zestril 76 78 (3) (8) 5 (29)
Plendil 74 70 6 - 13 117
Others 72 73 (1) (7) - (100)
Total Cardiovascular 1,755 1,540 14 10 778 6
Respiratory:
Symbicort 414 308 34 25 30 n/m
Pulmicort 320 301 6 4 203 7
Rhinocort 95 102 (7) (9) 62 (11)
Oxis 23 22 5 - - -
Accolate 19 21 (10) (10) 14 (7)
Synagis 16 - n/m n/m 2 n/m
FluMist - - - - - -
Others 40 37 8 3 - -
Total Respiratory 927 791 17 12 311 13
Oncology:
Arimidex 430 379 13 10 178 14
Casodex 331 306 8 5 75 1
Zoladex 275 250 10 6 23 (18)
Iressa 61 62 (2) - 2 (50)
Ethyol 8 - n/m n/m 8 n/m
Others 90 74 22 19 41 52
Total Oncology 1,195 1,071 12 8 327 13
Neuroscience:
Seroquel 963 849 13 11 678 9
Local anaesthetics 143 140 2 (3) 14 (44)
Zomig 106 103 3 (1) 42 (9)
Diprivan 66 72 (8) (11) 10 (41)
Others 15 14 7 7 4 -
Total Neuroscience 1,293 1,178 10 7 748 5
Infection and Other:
Merrem 194 143 36 28 35 59
Other Products 66 65 2 (6) 32 3
Total Infection and Other 260 208 25 17 67 26
Aptium Oncology 102 93 10 10 102 10
Astra Tech 111 90 23 14 14 40
Total 7,273 6,625 10 6 3,268 6
Information for US Investors
RECONCILIATION TO UNITED STATES ACCOUNTING PRINCIPLES
The consolidated income statement and balance sheet set out on pages 17 and 19,
respectively, are prepared in accordance with IASs and IFRSs (collectively 'IFRS
') as adopted by the European Union (EU), which differ in certain material
respects from those accounting principles generally accepted in the United
States (US GAAP). The differences as they apply to AstraZeneca PLC are
explained in the Annual Report and Form 20-F Information 2006 except that,
during the period, the Company adopted the provisions of FASB Interpretation
No.48 'Accounting for Uncertainty in Income Taxes - an interpretation of FASB
Statement No.109' (FIN48). Adoption of FIN48 had no significant effect on the
net income or shareholders' equity in accordance with US GAAP. The effects on
income and shareholders' equity of the GAAP differences are shown below.
Income attributable to Shareholders 1st Half 1st Half
2007 2006
$m $m
Net income for the period under IFRS 2,986 3,024
Adjustments to conform to US GAAP
Purchase accounting adjustments:
- amortisation and depreciation (533) (500)
- in-process research and development (1,010) (504)
Capitalisation less disposals and amortisation of interest (10) (11)
Pension and other post-retirement benefits (4) (36)
Financial instruments (29) (50)
In-licensed development intangibles (69) (97)
Deferred taxation
- on purchase accounting adjustments 149 139
- others 5 (31)
Other 39 32
Net income in accordance with US GAAP 1,524 1,966
Net income per Ordinary Share in accordance with US GAAP - basic $1.01 $1.25
Net income per Ordinary Share in accordance with US GAAP - diluted $1.01 $1.24
RECONCILIATION TO UNITED STATES ACCOUNTING PRINCIPLES (CONTINUED)
Shareholders' equity 30 June 30 June
2007 2006
$m $m
Shareholders' equity under IFRS 14,847 14,910
Adjustments to conform to US GAAP
Purchase accounting adjustments:
- goodwill 14,423 14,221
- property, plant and equipment and intangible assets 4,127 5,003
- in-process research and development (1,683) (601)
Capitalisation, less disposals and amortisation of interest 210 230
Pension and other post-retirement benefits (44) 1,328
Financial instruments (28) (44)
In-licensed development intangibles (378) (212)
Deferred taxation
- on purchase accounting adjustments (796) (1,400)
- others (139) (495)
Other 49 27
Shareholders' equity in accordance with US GAAP 30,588 32,967
Shareholder Information
ANNOUNCEMENTS AND MEETINGS
Announcement of third quarter and nine months 2007 results 1 November 2007
Announcement of fourth quarter and full year 2007 results 31 January 2008
DIVIDENDS
The record date for the first interim dividend payable on 17 September 2007 (in
the UK, Sweden and the US) is 10 August 2007. Ordinary shares will trade
ex-dividend on the London and Stockholm Stock Exchanges from 8 August 2007.
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 these interim financial statements are
trademarks of the AstraZeneca Group of companies:
Accolate Arimidex Astra Tech Atacand Casodex Crestor Diprivan Ethyol
Faslodex FluMist Iressa Losec Merrem Nexium Nolvadex Numax Oxis Plendil
Prilosec Pulmicort Pulmicort Respules Recentin Rhinocort Rhinocort Aqua
Seloken Seroquel Symbicort Symbicort SMART Synagis Tenormin Toprol-XL
Zestril Zoladex Zomig
ADDRESSES FOR CORRESPONDENCE
Registrar and Depositary Registered Office Swedish Securities
Transfer Office for ADRs Registration Centre
The AstraZeneca Registrar JPMorgan Chase Bank 15 Stanhope Gate VPC AB
Lloyds TSB Registrars JPMorgan 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 (freephone in UK): Tel (toll free in US): Tel: +44 (0)20 7304 5000 Tel: +46 (0)8 402 9000
0800 389 1580 888 697 8018
Tel (outside UK): Tel: +1 (201) 680 6630
+44 (0)121 415 7033
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
In order to utilise the 'safe harbour' provisions of the US Private Securities
Litigation Reform Act 1995, we are providing the following cautionary statement:
These interim financial statements contain certain forward-looking statements
about AstraZeneca. Although we believe our expectations are based on reasonable
assumptions, any forward-looking statements may be influenced by factors that
could cause actual outcomes and results to be materially different from those
predicted. We identify the forward-looking statements by using the words '
anticipates', 'believes', 'expects', 'intends' and similar expressions in such
statements. These forward-looking statements are subject to numerous risks and
uncertainties. Important factors that could cause actual results to differ
materially from those contained in forward-looking statements, certain of which
are beyond our control, include, among other things: the loss or expiration of
patents, marketing exclusivity or trade marks; the risk of substantial adverse
litigation/government investigation claims and insufficient insurance coverage;
exchange rate fluctuations; the risk that R&D will not yield new products that
achieve commercial success; the risk that strategic alliances will be
unsuccessful; the impact of competition, price controls and price reductions;
taxation risks; the risk of substantial product liability claims; the impact of
any failure by third parties to supply materials or services; the risk of
failure to manage a crisis; the risk of delay to new product launches; the
difficulties of obtaining and maintaining regulatory approvals for products; the
risk of failure to observe ongoing regulatory oversight; the risk that new
products do not perform as we expect; the risk of environmental liabilities; the
risks associated with conducting business in emerging markets; the risk of
reputational damage; and the risk of product counterfeiting.
This information is provided by RNS
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