24th Apr 2008 11:00
AstraZeneca PLC24 April 2008 AstraZeneca PLCFirst Quarter Results 2008 - Core EPS increased by 9 percent at CER to $1.28.- First quarter sales increased by 4 percent at CER to $7,677 million. - Inclusion of MedImmune sales more than offset the decline in Toprol-XL((TM)) sales in the US. - Strong growth in Emerging Markets, with sales up 11 percent at CER.- Underlying business performance on track. Core EPS target increased to reflect year to date currency impact. - Revised target range for Core EPS is $4.45 to $4.75.- First of 3 planned regulatory filings for the year achieved. - US Biologics Licence Application for motavizumab submitted in January.- Settlement agreement with Ranbaxy in Nexium(TM) patent infringement announced 15 April. - Agreement gives increased clarity and stability to allow continued inves(TM)ent in our growing pipeline. - Company will vigorously defend its intellectual property. Financial Summary Group 1st Quarter 1st Quarter Actual CER 2008 2007 % % $m $m Sales 7,677 6,966 +10 +4 Reported Operating Profit 2,257 2,170 +4 -5 Profit before Tax 2,143 2,267 -5 -15 Earnings per Share $1.03** $1.02 +1 -9 Core Operating Profit 2,765 2,274 +21 +12 Profit before Tax 2,651 2,371 +12 +2 Earnings per Share* $1.28 $1.07 +19 +9 *Core financial measures are supplemental non-IFRS measures which managementbelieve useful to understanding the Company's performance; it is upon thesemeasures that financial guidance for 2008 is based. See Operating and FinancialReview for a reconciliation of Core to Reported financial measures. **Included in Reported EPS for Q1 2008 is a ($0.12) charge for impairment ofintangible assets related to Ethyol(TM), a product acquired with MedImmune,arising from an "at risk" launch of a generic product by Sun PharmaceuticalIndustries Ltd., prior to the conclusion of ongoing patent litigation. David Brennan, Chief Executive Officer, said: "The first quarter performanceputs us on track to achieve our full year financial targets. We have alsoannounced the motavizumab BLA submission in January - the first of threeregulatory filings planned for 2008 - and the agreement to settle the Nexium(TM)patent infringement litigation against Ranbaxy, which has provided increasedclarity and stability to allow us to continue the substantial inves(TM)ent inour growing pipeline of new medicines." London, 24 April 2008 Media Enquiries: Steve Brown/Chris Sampson (London) (020) 7304 5033/5130 Earl Whipple (Wilmington) (302) 885 8197 Per Lorentz (Sodertaje) (8) 553 26020 Analyst/Investor Enquiries: Mina Blair/Karl Hard (London) (020) 7304 5084/5322 Jonathan Hunt (London) (020) 7304 5087 Staffan Ternby (Sodertaje) (8) 553 26107 Ed Seage/Jorgen Winroth (US) (302) 886 4065/(212) 579 0506 Peter Vozzo (MedImmune) (301) 398 4358 Business Highlights All narrative in this section refers to growth rates atconstant exchange rates (CER) unless otherwise indicated Sales in the first quarter increased by 4 percent at CER, or 10 percent on an asreported basis. Sales in the US were up 5 percent; the inclusion of MedImmunesales in the quarter more than offset the decline in Toprol-XL(TM) sales in theUS market. Sales in the Rest of World were up 4 percent. Sales in EstablishedMarkets were up 1 percent despite a 1 percent decline in Western Europe. Salesin Emerging Markets were up 11 percent, driven by strong growth in China andother Asian markets. Core operating profit in the first quarter was up 12 percent to $2,765 million,as a result of improvement in Core gross margin and continued efficiencies in SG&A and R&D. Reported operating profit, which included restructuring and synergycosts ($117 million), Merck and MedImmune related amortisation ($134 million)and an intangible asset impairment charge as a result of the "at risk" launch ofa generic competitor to MedImmune's oncology product Ethyol(TM) ($257 million)was $2,257 million, 5 percent lower than last year. Core earnings per share in the first quarter were $1.28 compared with $1.07 inthe first quarter 2007, a 9 percent increase at CER. The increase is the resultof the growth in Core operating profit and the benefit of a lower number ofshares outstanding, partially offset by increased net interest expense. Research and Development Update In the first quarter, the first of three planned regulatory submissions for 2008was achieved, with the submission of the Biologics Licence Application in the USfor motavizumab in January. The filing for saxagliptin is on track for mid-year,with Phase III clinical data to be presented at the upcoming American DiabetesAssociation meeting. The regulatory submission for Zactima(TM) is planned forthe fourth quarter. The large lifecycle management programme in support of Seroquel XR(TM) isnearing completion, culminating in a large number of regulatory submissions in2008. Regulatory filings in the US and Europe for Seroquel XR(TM) for thetrea(TM)ent of Bipolar Mania and Bipolar Depression were announced early in thefirst quarter. The US submission for Seroquel XR(TM) for the trea(TM)ent ofmajor depressive disorder (MDD) was made on 29 February. Submissions for MDD inEurope and filings for generalised anxiety disorder (GAD) in the US and Europewill follow later this year. Much of the clinical data supporting the MDD andGAD filings will be presented at the American Psychiatric Association meetingearly next month. On 31 March, AstraZeneca announced its decision to stop the Crestor(TM) JUPITERclinical study early based on a recommendation from an Independent DataMonitoring Board and the JUPITER Steering Committee, which met on 29 March. Thestudy will be stopped early because there is unequivocal evidence of a reductionin cardiovascular morbidity and mortality amongst patients who received Crestor(TM) when compared to placebo. The JUPITER study team has initiated activities to close this large multi-centrestudy. Over 15,000 trial participants will be scheduled by their investigatorfor final assessments at over 1,200 sites in 26 countries. Data from thesevisits will generate 80,000 pages of case report forms. We plan to complete theanalysis in the fourth quarter of this year. Enhancing Productivity The Company remains on track to deliver two-thirds of the total programmebenefits of $1.4 billion per annum by the end of this year, with the full amountto be delivered by 2010. As part of this programme, AstraZeneca undertook major restructuring in many ofits European sales and marketing organisations in 2007. As a result, the Companyis now delivering about the same level of sales with smaller sales forces in itslargest marketing companies in Western Europe. The R&D organisation is now actively involved in the implementation of ouragreement with Cognizant to provide centralised Data Management services for thewhole of AstraZeneca Clinical Development. This agreement is the largest suchcontract within the pharmaceutical industry and will deliver economies of scaleand cost savings that will help R&D deliver its commi(TM)ent to improvingproductivity and efficiency. A further $117 million in costs associated with the Company-wide restructuringand synergy programmes were charged to the first quarter accounts, bringingcumulative charges since the inception of the programmes to $1,083 million. Future Prospects Based on an assessment of the underlying business performance in the firstquarter and the outlook for the remainder of the year, the Company believes itis on track to achieve the full year targets. The target range for Core earningsper share has been increased to $4.45 to $4.75 to reflect the currency benefitsrealised in the first quarter relative to the currency assumptions upon whichthe targets were based. Disclosure Notice: The preceding forward-looking statements relating toexpectations for earnings and business prospects for AstraZeneca PLC are subjectto risks and uncertainties, which may cause results to differ materially fromthose set forth in the forward-looking statements. These include, but are notlimited to: the rate of growth in sales of generic competitors to Toprol-XL(TM)in the US market, the rate of growth in sales of generic products in the PPImarket in the US, continued growth in currently marketed products (in particularCrestor(TM), Nexium(TM), Seroquel(TM), Symbicort(TM) and Arimidex(TM)), thegrowth in costs and expenses, interest rate movements, exchange ratefluctuations, and the tax rate. For further details on these and other risks anduncertainties, see AstraZeneca PLC's Securities and Exchange Commission filings,including the 2007 Annual Report on Form 20-F. Sales All narrative in this section refers to growth rates at constant exchange rates(CER) unless otherwise indicated Gastrointestinal First Quarter CER % 2008 2007Nexium(TM) 1,238 1,308 -9Losec(TM)/ Prilosec(TM) 252 279 -16Total 1,510 1,607 -10 • In the US, Nexium(TM) sales in the first quarter were $736 million, a 15 percent decline compared with last year. Volume was broadly unchanged compared with the first quarter last year; dispensed retail unit demand was essentially flat, whilst an increase in non-retail volume was offset by trade destocking during the quarter. Net prices during the first quarter are slightly lower than those realised in the fourth quarter 2007; the price variance versus the first quarter 2007 reflects the back-loaded phasing of the lower prices realised over the course of last year. • Nexium(TM) sales in other markets were up 1 percent, as sales growth in Canada and in Emerging Markets exceeded the declines in Nexium(TM) sales in Western Europe. • The Company expects a mid-single digit sales decline for worldwide sales of Nexium(TM) for the full year. • Prilosec(TM) sales in the US were down 13 percent in the first quarter. Losec(TM) sales in other markets were down 17 percent despite modest increases in Japan and China. Cardiovascular First Quarter CER % 2008 2007Crestor(TM) 772 628 +16Seloken(TM) / Toprol-XL(TM) 190 444 -60Atacand(TM) 346 296 +7Plendil(TM) 66 65 -6Zestril(TM) 59 80 -33Total 1,571 1,653 -11 • In the US, Crestor(TM) sales in the first quarter were $353 million, a 3 percent increase over last year. Crestor (TM) share of total prescriptions in the US statin market increased to 8.75 percent in March; Crestor(TM) is the only branded statin to gain market share during the first quarter. Since the launch of the atherosclerosis indication in November 2007, Crestor(TM) share of new patient starts, as well as net switches to Crestor(TM) from other statin products, has increased. • Crestor(TM) sales in Rest of World now exceed those in the US. Crestor(TM) sales in other markets were up 32 percent to $419 million. Sales in Western Europe were up 11 percent. Crestor(TM) sales increased by 180 percent in Japan, where Crestor(TM) volume share of the statin market has reached 13.2 percent. • US sales of the Toprol-XL(TM) product range, which includes sales of the authorised generic to Par, were $64 million in the first quarter, down 81 percent. Generic products accounted for 87 percent of dispensed prescriptions in the first quarter. • Sales of Seloken(TM) in other markets were unchanged, as the growth in Emerging Markets offset the decline in Established Markets. • Atacand(TM) sales in the first quarter were down 5 percent in the US. Sales in other markets increased 10 percent, chiefly in Western Europe. Respiratory and Inflammation First Quarter CER % 2008 2007Symbicort(TM) 471 354 +21Pulmicort(TM) 411 401 -1Rhinocort(TM) 80 92 -16Oxis(TM) 17 23 -35Accolate(TM) 18 19 -5Total 1,040 931 +5 • Symbicort(TM) sales in the US were $44 million in the first quarter. Specialist adoption of Symbicort(TM) is steadily increasing; since launch more than 80 percent of allergists and 70 percent of pulmonary specialists in our target audience have prescribed Symbicort(TM). The product trial rate among primary care physicians has increased to more than 29 percent. Overall, Symbicort(TM) share of new prescriptions for fixed combinations reached 7.8 percent in the week ending 11 April; market share among patients newly starting combination trea(TM)ents has increased to over 15 percent. • US regulatory filings for Symbicort(TM) for the trea(TM)ent of COPD and for paediatric use are planned for the second quarter 2008. • Symbicort(TM) sales in other markets were up 9 percent in the first quarter, to $427 million, with more than half of the increase coming from Western Europe. • US sales for Pulmicort(TM) were up 2 percent in the first quarter. Initial stocking of the Pulmicort(TM) Flexhaler (TM) dry powder inhaler (which replaces Pulmicort(TM) Turbuhaler(TM) in the market) took place in the first quarter 2007, and has adversely affected the reported sales growth rate for the quarter. Sales of Pulmicort(TM) Respules (TM) increased 11 percent against the backdrop of a relatively mild season for respiratory illness. • Pulmicort(TM) sales in other markets were down 6 percent in the first quarter. Oncology First Quarter CER % 2008 2007Arimidex(TM) 430 401 +2Casodex(TM) 316 310 -5Zoladex(TM) 255 249 -6Iressa(TM) 58 52 +4Faslodex(TM) 56 49 +8Nolvadex(TM) 18 19 -16Ethyol(TM) * 14 - n/mTotal 1,165 1,096 -1 * Sales of this MedImmune product are consolidated in AstraZeneca accounts from1 June 2007. As a result, there are no prior period sales included. • In the US,sales of Arimidex(TM) were up 13 percent in the first quarter, to $183 million.Total prescriptions for Arimidex(TM) increased by 2 percent in the quarter. • Arimidex(TM) sales in other markets were down 6 percent to $247 million as sales in Western Europe reflect a slowing in the aromatase inhibitor market and a small decline in market share. • Casodex(TM) sales in the first quarter were down 10 percent in the US and declined 4 percent in other markets. • Iressa(TM) sales increased by 4 percent in the first quarter, chiefly as a result of growth in Asian Emerging Markets, including China. Sales in Japan were down 4 percent. • Faslodex(TM) sales in the US were $25 million in the first quarter, unchanged from the first quarter 2007. Sales in other markets were $31 million, an increase of 17 percent. • In the US, sales of Ethyol(TM) were $14 million in the first quarter. On 31 March, Sun Pharmaceutical Industries Ltd. commenced an "at risk" launch of its generic amifostine product prior to the conclusion of ongoing patent litigation. MedImmune has subsequently entered into a supply and distribution agreement with Bedford Pharmaceuticals to distribute an authorised generic version of amifostine. The generic launch gave rise to an intangible asset impairment charge in the first quarter accounts. Neuroscience First Quarter CER % 2008 2007Seroquel(TM) 1,050 923 +10Zomig(TM) 107 107 -7Total 1,378 1,227 +7 • In the US, Seroquel(TM) sales were up 7 percent to $702 million. Total prescriptions for Seroquel(TM) increased 8 percent in the first quarter, with 25 percent of the growth attributable to Seroquel XR(TM). The increase in Seroquel(TM) prescriptions accounted for more than half the prescription growth for the antipsychotic market in the US in the first quarter. • Seroquel(TM) sales in other markets increased 17 percent in the first quarter to $348 million. Sales were up 17 percent in Western Europe, fuelled by a 43 percent increase in Germany, which included launch stocking for Seroquel XR(TM). • Zomig(TM) sales in the first quarter were down 6 percent in the US and were down 7 percent in other markets. Infection and Other First Quarter CER % 2008 2007Synagis(TM)* 519 - n/mMerrem(TM) 213 178 +12FluMist(TM)* - - n/mTotal 787 252 +206 * Sales of these MedImmune products are consolidated in AstraZeneca accountsfrom 1 June 2007. As a result, there are no prior period sales included. • Sales of Synagis(TM) totalled $519 million in the first quarter. US sales were $456 million; sales outside the US were $63 million. There are no corresponding sales recorded in the AstraZeneca accounts in the prior year; on a pro-forma basis Synagis(TM) sales are 2 percent above the first quarter last year. Geographic Sales First Quarter CER % 2008 2007North America 3,723 3,488 +5 US 3,401 3,234 +5Established ROW* 2,973 2,664 +1Emerging ROW 981 814 +11 *Established ROW comprises Western Europe (including France, UK, Germany, Italy,Sweden, and others), Japan, Australia and New Zealand. • In the US, sales were up 5 percent in the first quarter. The addition of MedImmune sales more than offset the decline in Toprol-XL(TM). Underlying demand growth was ahead of reported sales growth as a result of some destocking in the quarter. Among the key brands, the growth in Symbicort(TM), Crestor(TM), Arimidex(TM) and Seroquel (TM) was offset by the decline in Nexium(TM). • Sales in the Established Rest of World segment were up 1 percent. Sales in Western Europe were down 1 percent, with sales growth for Seroquel(TM), Symbicort(TM) and Crestor(TM) offset by the declines in Losec(TM) and Nexium(TM). Sales in Japan were up 4 percent, as wholesalers constrained purchases ahead of the biennial price decreases taking effect in April. Sales in Australia increased 29 percent, fuelled by the launch performance of Crestor (TM). • Sales in Emerging Markets increased 11 percent, accounting for two-thirds of total Company sales growth outside the US. Sales in Emerging Asia markets (including China) were up 22 percent. Sales in Latin America were up 11 percent. Operating and Financial Review All narrative in this section refers to growth rates at constant exchange rates(CER) unless otherwise indicated First Quarter Restructuring Reported and synergy MedImmune Ethyol(TM) Merck Core Core Actual CER 2008 costs Amortisation Impairment Amortisation 2008 2007 % % Sales 7,677 - - - - 7,677 6,966 10 4Cost of Sales (1,502) 32 - - - (1,470) (1,404)Gross Margin 6,175 32 - - - 6,207 5,562 12 5% sales 80.4% 80.9% 79.8% +1.1 +0.6Distribution (66) - - - - (66) (61) 8 2% sales 0.9% 0.9% 0.9% - -R&D (1,236) 54 - - - (1,182) (1,170) 1 -2% sales 16.1% 15.4% 16.8% +1.4 +1.1SG&A (2,737) 31 79 257 25 (2,345) (2,195) 7 2% sales 35.7% 30.6% 31.5% +0.9 +0.7Other income 121 - 30 - - 151 138 9 8% sales 1.6% 2.0% 2.0% - +0.1Operating Profit 2,257 117 109 257 25 2,765 2,274 21 12% sales 29.4% 36.0% 32.6% +3.4 +2.5Net finance (114) - - - - (114) 97(expense)/incomeProfit before Tax 2,143 117 109 257 25 2,651 2,371 12 2Taxation (638) (35) (32) (77) - (782) (728)Profit after Tax 1,505 82 77 180 25 1,869 1,643 14 4Minority Interests (2) - - - - (2) (4)Net Profit 1,503 82 77 180 25 1,867 1,639 14 4Weighted Average 1,457 1,457 1,457 1,457 1,457 1,457 1,527SharesEarnings per Share 1.03 0.06 0.05 0.12 0.02 1.28 1.07 19 9 A reconciliation by quarter of Reported to Core financial measures for 2007 isgiven in note 3. Sales increased by 10 percent on a reported basis and by 4 percent on a constantcurrency basis. Currency movements increased sales by 6 percent. Core gross margin of 80.9 percent in the first quarter is 0.6 percentage pointshigher than last year. Principal contributors were lower payments to Merck (1.2percentage points), and continued efficiency gains and favourable product mix(0.8 percentage points), partially offset by higher royalty payments (1.4percentage points), chiefly due to the inclusion of Synagis(TM) sales in thefirst quarter of 2008. Core R&D expenditure was $1,182 million in the first quarter, down 2 percentover last year. In the first quarter 2007, there were intangible assetimpairment charges relating to the collaborations with AtheroGenics and Avanir;excluding these impairments, Core R&D expenditure was up 4 percent in thequarter, due to the inclusion of MedImmune R&D expense offset by ongoingefficiencies. The Company continues to make good progress on the delivery of R&D projects and productivity initiatives. Core SG&A costs of $2,345 million were 2 percent higher than the first quarterof 2007, where the inclusion of MedImmune has more than offset operationalefficiencies and benefits from the Company's productivity initiatives. ExcludingMedImmune, Core SG&A expense was 2 percent lower than last year. Core other income of $151 million was $13 million higher than the first quarterin 2007 with the inclusion of MedImmune being partially counterbalanced by lowerone-time gains and royalty income. The amortisation expense relating to theintangible assets arising from MedImmune's licensing and royalty income streamshas been reclassified from SG&A to other income. As a result of this change, theCompany still expects Core other income to be similar to last year, but withthis amortisation expense, other income on a reported basis will be lower than2007. Core operating profit was $2,765 million, an increase of 12 percent at CER or up21 percent on an as reported basis. Currency movements increased operatingprofit by 9 percent. In comparison to last year, the dollar was 13 percentweaker against the euro, increasing sales, and also against the Swedish krona(11 percent) and sterling (1 percent), increasing costs. On a constant currencybasis, Core operating margin increased by 2.5 percentage points to 36.0 percentof sales, as a result of improvements in gross margin and efficiencies in SG&Aand R&D. Core earnings per share in the first quarter were $1.28, a CER increase of 9percent, as the increase in Core operating profit and the benefit of a lowernumber of shares in issue was partially offset by increased net interestexpense. Core earnings per share on an as reported basis increased 19 percent. Reported operating profit was down 5 percent to $2,257 million, reflecting theimpact of restructuring and synergy costs ($117 million), MedImmune relatedamortisation ($109 million) and the impairment of intangible assets arising fromthe "at risk" launch of a generic competitor to Ethyol(TM) ($257 million)compared with the first quarter last year. Reported earnings per share were$1.03. Finance Income and Expense Net finance expense was $114 million for the first quarter, versus income of $97million in the first quarter of 2007. This decrease is primarily attributable tothe interest payable on the borrowings to acquire MedImmune, Inc. Taxation The effective tax rate for the quarter was 29.8 percent compared with 31.0percent for the same period last year. For the full year the tax rate isanticipated to be around 29.5 percent, the same as for 2007. Cash Flow Cash generated from operating activities was $2,391 million in the firstquarter, in comparison with $2,187 million in 2007. The increase of $204 millionwas mainly driven by an increase in operating profit before depreciation,amortisation and impairment of $419 million, partially offset by an increase ininterest payments of $256 million. Net cash outflows from investing activities were $2,937 million in the firstquarter, versus $616 million in 2007. This was due primarily to the payment of$2,630 million to Merck (see note 6), which was partially offset by reductionsin expenditure on new externalisation deals and in the purchase of short terminves(TM)ents and fixed deposits. Cash distributions to shareholders were $2,007 million, through the payment ofthe second interim dividend from 2007. Inves(TM)ents As described in note 6, on 17 March, the Company made payments under theprovisions of the Merck agreements of approximately $2.6 billion. These havebeen recorded as intangible assets to reflect the benefits accruing in respectof relief from future contingent payments and the ability to fully exploit ourresources and products within certain therapy areas. There were no othersignificant inves(TM)ents in the quarter. Debt and Capital Structure As at 31 March 2008, outstanding gross debt (including loans, short-termborrowings and overdrafts) was $15,002 million (31 December: $15,156 million),of which $11,116 million is due after one year (31 December: $10,876 million).Outstanding net debt of $11,752 million increased by $2,640 million from 31December, principally as a result of the significant cash outflows as describedabove. Share Repurchases During the first quarter, there were no share repurchases. The total number of shares in issue at 31 March 2008 was 1,457 million. The Board's distribution policy and its overall financial strategy is to strikea balance between the interests of the business, our shareholders and ourfinancial creditors, whilst maintaining a strong inves(TM)ent grade creditrating. The Board expects to undertake share repurchases in the region of $1billion in 2008, subject to business needs. Calendar 31 July 2008 Announcement of second quarter and half year 2008 results30 October 2008 Announcement of third quarter and nine months 2008 results David BrennanChief Executive Officer This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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