24th Apr 2008 11:00
AstraZeneca PLC24 April 2008 Consolidated Income Statement 2008 2007For the quarter ended 31 March $m $m Sales 7,677 6,966Cost of sales (1,502) (1,486)Distribution costs (66) (61)Research and development (1,236) (1,170)Selling, general and administrative costs (2,737) (2,217)Other operating income and expense 121 138 Operating profit 2,257 2,170Finance income 258 247Finance expense (372) (150) Profit before tax 2,143 2,267Taxation (638) (703) Profit for the period 1,505 1,564 Attributable to: Equity holders of the Company 1,503 1,560Minority interests 2 4 1,505 1,564 Basic earnings per $0.25 Ordinary Share $1.03 $1.02Diluted earnings per $0.25 Ordinary Share $1.03 $1.02 Weighted average number of Ordinary Shares in issue (millions) 1,457 1,527Diluted average number of Ordinary Shares in issue (millions) 1,457 1,531 Consolidated Balance Sheet As at 31 Mar As at 31 Dec As at 31 Mar 2008 2007 2007 $m $m $mASSETSNon-current assetsProperty, plant and equipment 8,486 8,298 7,420Goodwill 9,906 9,884 1,102Intangible assets 13,778 11,467 3,345Other investments 197 182 116Deferred tax assets 1,400 1,044 1,296 33,767 30,875 13,279 Current assetsInventories 2,169 2,119 2,294Trade and other receivables 7,054 6,668 6,238Other investments 330 177 849Income tax receivable 2,218 2,251 1,338Cash and cash equivalents 2,920 5,867 5,567 14,691 17,082 16,286Total assets 48,458 47,957 29,565 LIABILITIESCurrent liabilitiesInterest bearing loans and borrowings (3,886) (4,280) (59)Trade and other payables (7,194) (6,968) (6,913)Provisions (531) (387) (99)Income tax payable (4,071) (3,552) (3,278) (15,682) (15,187) (10,349)Non-current liabilitiesInterest bearing loans and borrowings (11,116) (10,876) (1,087)Deferred tax liabilities (4,322) (4,119) (1,695)Retirement benefit obligations (1,755) (1,998) (1,772)Provisions (490) (633) (384)Other payables (226) (229) (256) (17,909) (17,855) (5,194)Total liabilities (33,591) (33,042) (15,543)Net assets 14,867 14,915 14,022 EQUITY Capital and reserves attributable to equityholders of the Company Share capital 364 364 378Share premium account 1,889 1,888 1,704Other reserves 1,882 1,902 1,884Retained earnings 10,585 10,624 9,941 14,720 14,778 13,907Minority equity interests 147 137 115Total equity 14,867 14,915 14,022 Consolidated Cash Flow Statement 2008 2007For the quarter ended 31 March $m $m Cash flows from operating activitiesProfit before taxation 2,143 2,267Finance income and expense 114 (97)Depreciation, amortisation and impairment 702 370Increase in working capital (59) (61)Other non-cash movements 100 88 Cash generated from operations 3,000 2,567Interest paid (258) (2)Tax paid (351) (378) Net cash inflow from operating activities 2,391 2,187 Cash flows from investing activitiesAcquisition of business operations - (143)Movement in short term investments and fixed deposits (31) (193)Purchase of property, plant and equipment (249) (222)Disposal of property, plant and equipment 14 13Purchase of intangible assets (2,689) (183)Purchase of non-current asset investments (29) -Interest received 61 113Dividends paid by subsidiaries to minority interest (14) (1) Net cash outflow from investing activities (2,937) (616) Net cash (outflow)/inflow before financing activities (546) 1,571 Cash flows from financing activitiesProceeds from issue of share capital 1 33Repurchase of shares - (1,184)Dividends paid (2,007) (1,878)Movement in short term borrowings (375) (10) Net cash outflow from financing activities (2,381) (3,039) Net decrease in cash and cash equivalents in the period (2,927) (1,468)Cash and cash equivalents at the beginning of the period 5,727 6,989Exchange rate effects 1 (1) Cash and cash equivalents at the end of the period 2,801 5,520 Cash and cash equivalents consists of:Cash and cash equivalents 2,920 5,567Overdrafts (119) (47) 2,801 5,520 Consolidated Statement of Recognised Income and Expense 2008 2007 For the quarter ended 31 March $m $m Profit for the period 1,505 1,564Foreign exchange and other adjustments on consolidation 120 (22)Available for sale losses taken to equity (14) (2)Actuarial gain for the period 290 84Tax on items taken directly to reserves (26) (16) 370 44Total recognised income and expense for the period 1,875 1,608 Attributable to:Equity holders of the Company 1,865 1,605Minority interests 10 3 1,875 1,608 Notes to the Interim Financial Statements 1 BASIS OF PREPARATION AND ACCOUNTING POLICIES These unaudited financial statements for the quarter ended 31 March 2008 havebeen prepared in accordance with International Accounting Standards andInternational Financial Reporting Standards (collectively "IFRS") as adopted bythe European Union (EU) and as issued by the International Accounting StandardsBoard. Details of the accounting policies applied are those set out inAstraZeneca PLC's Annual Report and Form 20-F Information 2007. The information contained in Note 5 updates the disclosures concerning legalproceedings and contingent liabilities in the Company's Annual Report and Form20-F Information 2007. These interim financial statements do not constitute statutory accounts of theGroup within the meaning of Section 240 of the Companies Act 1985. Statutoryaccounts for the year ended 31 December 2007 will be filed with the Registrar ofCompanies following the Company's Annual General Meeting. The auditors' reporton those accounts was unqualified and did not contain any statement underSection 237 of the Companies Act 1985. 2 NET DEBT The table below provides an analysis of net debt and a reconciliation of netcash flow to the movement in net debt. At 1 Jan Cash Non-cash Exchange At 31Mar 2008 flow movements movements 2008 $m $m $m $m $m Loans due after 1 year (10,876) - (81) (159) (11,116)Current instalments of loans - - - - - Total loans (10,876) - (81) (159) (11,116) Other investments - current 177 31 122 - 330Cash and cash equivalents 5,867 (2,950) - 3 2,920Overdrafts (140) 23 - (2) (119)Short term borrowings (4,140) 375 - (2) (3,767) 1,764 (2,521) 122 (1) (636)Net debt (9,112) (2,521) 41 (160) (11,752) Non-cash movements in the period include fair value adjustments under IAS 39. 3 RECONCILIATION OF REPORTED TO CORE FINANCIAL MEASURES For the quarter ended 31 March 2007 Restructuring and synergy MedImmune Merck Reported costs Amortisation* Amortisation Core Sales 6,966 - - - 6,966Cost of sales (1,486) 82 - - (1,404) Gross Margin 5,480 82 - - 5,562Distribution (61) - - - (61)R&D (1,170) - - - (1,170)SG&A (2,217) - - 22 (2,195)Other income 138 - - - 138 Operating Profit 2,170 82 - 22 2,274Net finance income 97 - - - 97 Profit before Tax 2,267 82 - 22 2,371Taxation (703) (25) - - (728) Profit after Tax 1,564 57 - 22 1,643Minority Interests (4) - - - (4) Net Profit 1,560 57 - 22 1,639Weighted Average Shares 1,527 1,527 - 1,527 1,527 Earnings per Share 1.02 0.04 - 0.01 1.07 * MedImmune amortisation commenced in Q2 2007 For the quarter ended 30 June 2007 Restructuring and synergy MedImmune Merck Reported costs Amortisation Amortisation Core Sales 7,273 - - - 7,273Cost of sales (1,668) 199 - - (1,469) Gross Margin 5,605 199 - - 5,804Distribution (61) - - - (61)R&D (1,225) 29 - - (1,196)SG&A (2,605) 148 35 25 (2,397)Other income 259 - - - 259 Operating Profit 1,973 376 35 25 2,409Net finance income 18 - - - 18 Profit before Tax 1,991 376 35 25 2,427Taxation (554) (105) (10) - (668) Profit after Tax 1,437 271 25 25 1,759Minority Interests (11) - - - (11) Net Profit 1,426 271 25 25 1,748Weighted Average Shares 1,503 1,503 1,503 1,503 1,503 Earnings per Share 0.95 0.18 0.02 0.02 1.17 For the quarter ended 30 September 2007 Restructuring and synergy MedImmune Merck Reported costs Amortisation Amortisation Core Sales 7,150 - - - 7,150Cost of sales (1,444) 39 - - (1,405) Gross Margin 5,706 39 - - 5,745Distribution (59) - - - (59)R&D (1,335) 8 - - (1,327)SG&A (2,487) 99 105 25 (2,258)Other income 197 - - - 197 Operating Profit 2,022 146 105 25 2,298Net finance expense (134) - - - (134) Profit before Tax 1,888 146 105 25 2,164Taxation (537) (42) (30) - (608) Profit after Tax 1,351 104 75 25 1,556Minority Interests (8) - - - (8) Net Profit 1,343 104 75 25 1,548Weighted Average Shares 1,486 1,486 1,486 1,486 1,486 Earnings per Share 0.91 0.06 0.05 0.02 1.04 For the quarter ended 31 December 2007 Restructuring and synergy MedImmune Merck Reported costs Amortisation Amortisation Core Sales 8,170 - - - 8,170Cost of sales (1,821) 95 - - (1,726) Gross Margin 6,349 95 - - 6,444Distribution (67) - - - (67)R&D (1,432) 36 - - (1,396)SG&A (3,055) 231 115 24 (2,685)Other income 134 - - - 134 Operating Profit 1,929 362 115 24 2,430Net finance expense (92) - - - (92) Profit before Tax 1,837 362 115 24 2,338Taxation (562) (111) (35) - (708) Profit after Tax 1,275 251 80 24 1,630Minority Interests (9) - - - (9) Net Profit 1,266 251 80 24 1,621Weighted Average Shares 1,464 1,464 1,464 1,464 1,464 Earnings per Share 0.86 0.18 0.05 0.01 1.10 4 RESTRUCTURING AND SYNERGY COSTS Profit before tax for the quarter ended 31 March 2008 is stated after chargingrestructuring and synergy costs of $117 million ($82 million in the firstquarter 2007). These have been charged to the income statement as follows: 1st Quarter 2008 1st Quarter 2007 $m $mCost of Sales 32 82R&D 54 -SG&A 31 -Total 117 82 5 LEGAL PROCEEDINGS and contingent liabilities AstraZeneca is involved in various legal proceedings considered typical to itsbusiness, including litigation relating to employment matters, productliability, commercial disputes, infringement of intellectual property rights,the validity of certain patents, anti-trust, securities law and governmentalinvestigations. The matters discussed below constitute the more significantdevelopments since publication of the disclosures concerning legal proceedingsin the Company's Annual Report and Form 20-F Information 2007. Matters disclosed in respect of the First Quarter of 2008 and April 2008. Abraxane(R) (paclitaxel protein-bound particles for injectable suspension)(albumin bound) As previously disclosed, in July 2006, Elan Pharma International Limited (Elan)filed a lawsuit in the US District Court for the District of Delaware againstAbraxis BioScience, Inc. (Abraxis). Elan essentially alleges that Abraxisinfringes two US patents in connection with the marketing, use and sale ofAbraxane(R). The US District Court for the District of Delaware has scheduled atrial, which is to commence on 2 June 2008. AstraZeneca is party to anagreement with Abraxis to co-promote Abraxane(R) in the US, but is not a partyto the litigation. AtacandTM (candesartan cilexetil) As previously disclosed, in April 2007 AstraZeneca received notice from SandozInc. (Sandoz) that Sandoz had filed an ANDA with the FDA, seeking approval tomarket a generic version of AtacandTM (candesartan cilexetil) in the 4, 8, 16and 32mg doses, prior to the expiration of US Patent No. 5534534 (the '534patent), which expires in July 2013. In March and April 2008, AstraZeneca (new drug application (NDA) holder) andTakeda (patent holder) received notices from Teva Pharmaceuticals USA Inc.(Teva) that Teva had filed an ANDA with the FDA, seeking approval to market ageneric version of AtacandTM in the 4, 8, 16 and 32mg doses, prior to theexpiration of the '534 patent. The notifications claim that the Teva products donot infringe the '534 patent. Teva did not challenge the compound patents listedin the FDA Orange Book with reference to AtacandTM, the later of which expiresin June 2012. As a result, Teva cannot market candesartan cilexetil until theend of the exclusivity period afforded by these patents. AstraZeneca and Takedahave decided not to bring an action for patent infringement at this time. CrestorTM (rosuvastatin) As previously reported, in December 2007, in response to notice-letters fromseven manufacturers that they had submitted ANDAs to the FDA for approval tomarket CrestorTM 5, 10, 20 and 40mg rosuvastatin calcium tablets prior to theexpiration of one or more of AstraZeneca's three FDA Orange Book-listed patents,AstraZeneca Pharmaceuticals LP, AstraZeneca UK Limited, IPR Pharmaceuticals,Inc., and AstraZeneca's licensor, Shionogi Seiyaku Kabushiki Kaisha (Shionogi),filed separate lawsuits in the US District Court for the District of Delaware,against Apotex, Aurobindo, Cobalt, Mylan, Par, Sandoz and Sun for infringementof Patent No. RE37,314 (the '314 patent) covering rosuvastatin calcium, theactive ingredient in Crestor tablets. The seven Delaware cases proceed. Each of the seven ANDA-filers sued byAstraZeneca in the District of Delaware for infringement of the '314 patent hasanswered, counterclaimed, or otherwise responded to AstraZeneca's pleadings.AstraZeneca has replied or responded as allowed. Among other responses, Apotexand Aurobindo have challenged the jurisdiction of the District of Delaware. Inthe event that Apotex or Aurobindo succeed in challenging jurisdiction inDelaware, and as an alternative to having concurrent CrestorTM litigations inmultiple District Courts, AstraZeneca has contingently moved before the JudicialPanel on Multidistrict Litigation pursuant to 28 U.S.C. section 1407 forcoordination and consolidation of all CrestorTM pre-trial matters by theDelaware court. Although AstraZeneca did not sue Apotex for infringement of patent no 6,316,460covering formulations (the '460 patent), in addition to responding toAstraZeneca's patent infringement action in Delaware, Apotex filed a declaratoryjudgment lawsuit against AstraZeneca based on AstraZeneca's '460 patent in USDistrict Court, Middle District of Florida. The Florida case has been stayedpending resolution of AstraZeneca's pending motion before the Judicial Panel onMultidistrict Litigation. In February 2008, AstraZeneca voluntarily dismissed the duplicate cases againstMylan and Cobalt, respectively, in West Virginia and Florida. The duplicate suitagainst Aurobindo in the District of New Jersey remains filed, but it has beenstayed by the Court pending resolution of AstraZeneca's pending motion beforethe Judicial Panel on Multidistrict Litigation. AstraZeneca continues to have full confidence in and will vigorously defend andenforce its intellectual property protecting CrestorTM. ExantaTM (ximelagatran) As previously disclosed, four putative and essentially similar securities classactions were filed in the US against AstraZeneca PLC, Hakan Mogren (whocurrently serves as a Director of AstraZeneca PLC), Sir Tom McKillop, JonathanSymonds and Percy Barnevik (who are former Directors of AstraZeneca PLC) betweenJanuary and March 2005. The defendants deny the allegations made in the lawsuitand will vigorously defend the action. The defendants filed a motion in 2006 todismiss the action, and the Court heard oral argument on defendants' motion on15 April 2008. NexiumTM (esomeprazole) Anti trust As previously disclosed, in December 2006 and January 2007, several lawsuitsagainst AstraZeneca entities, including putative class actions, were filed inthe US District Court for the District of Columbia alleging anti-trust claims ofunlawful monopolisation relating to PrilosecTM and NexiumTM. In March 2008, the motions to dismiss these cases were granted and the USDistrict Court for the District of Columbia ruled that the Plaintiffs had failedto show that AstraZeneca violated antitrust law. The Plaintiffs have notappealed. Patent Litigation As previously disclosed, in October 2005, AstraZeneca received a notice fromRanbaxy Pharmaceuticals, Inc. that Ranbaxy Laboratories Limited (togetherRanbaxy) had submitted an ANDA to the FDA for esomeprazole magnesiumdelayed-release capsules, 20 and 40mg. On 15 April 2008, it was announced that AstraZeneca had settled this litigation. Under the settlement agreement, Ranbaxy conceded that all six patents assertedby AstraZeneca in the patent litigation are valid and enforceable. Ranbaxy alsoaccepted that four of the patents would be infringed by the unlicensed sale ofRanbaxy's proposed generic product. The settlement agreement will allow Ranbaxyto sell its generic version of NexiumTM under a licence from AstraZenecastarting 27 May 2014. The settlement also includes a separate out-sourcingagreement where a portion of NexiumTM US manufacturing will move to Ranbaxy.This agreement is in line with AstraZeneca's stated supply chain strategy. Theremaining cases are ongoing. In March 2008, AstraZeneca received notice from Teva Parenteral Medicines (Teva)that Teva had submitted an NDA to the FDA regarding esomeprazole for injection,20mg/vial and 40mg/vial. The notice contains certifications of invalidity,unenforceability, and/or non-infringement in respect of US Patent No. 5,877,192,which is listed in the FDA Orange Book with reference to NexiumTM in intravenousform. AstraZeneca is evaluating Teva's notice. As previously disclosed, AstraZeneca initiated proceedings in the Federal Courtof Canada against Novopharm Limited in connection with certain patents relatedto omeprazole magnesium tablets, on the basis that Novopharm was seeking aNotice of Compliance in Canada based on a comparison with AstraZeneca's LosecTMtablets. Two of these proceedings remained pending until April 2008 at whichtime Novopharm withdrew the allegations which were the subject of theseproceedings and the proceedings were discontinued. AstraZeneca Canada Inc. received several notices of allegation from Apotex Inc.(Apotex) in late 2007 in respect of patents listed on the Patent Register inCanada for NexiumTM. Apotex asserted in its notices that it filed an AbbreviatedNew Drug Submission in March 2007, for 20 and 40mg esomeprazole magnesiumtrihydrate tablets and alleged non-infringement and/or invalidity of numerouspatents. AstraZeneca responded by commencing seven court applications in January2008 under the Patented Medicines (Notice of Compliance) Regulations (NOCRegulations). On 17 January 2008, Apotex advised that its product waserroneously described as being a trihydrate in its allegations, whichallegations Apotex asserted it was withdrawing. Apotex mailed replacementallegations on 17 January 2008. On 7 March 2008, AstraZeneca commenced court applications under the NOCRegulations in response to Apotex's replacement notices of allegation seekingdeclarations that the second set of allegations are not valid for the purposesof the NOC Regulations and, in the alternative, orders prohibiting the CanadianMinister of Health from issuing a Notice of Compliance (marketing approval) toApotex for 20 and 40mg esomeprazole magnesium tablets until after the expirationof AstraZeneca's listed patents. Apotex cannot obtain a Notice of Compliance for its esomeprazole tablets untilthe earlier of the disposition of all of the court applications in Apotex'sfavour or 24 months from the date on which the latest court application has beencommenced. AstraZeneca has full confidence in and will vigorously defend and enforce itsintellectual property protecting NexiumTM. PulmicortTM RespulesTM (budesonide inhalation suspension) In March 2008, AstraZeneca filed a lawsuit in the US District Court for theDistrict of New Jersey against Breath Limited for patent infringement. Thelawsuit is the result of an abbreviated New Drug Application (ANDA) filed byBreath with the US Food and Drug Administration (FDA) concerning Breath's intentto market a generic version of AstraZeneca's PulmicortTM RespulesTM (budesonideinhalation suspension) in the US prior to the expiration of AstraZeneca'spatents. The basis for AstraZeneca's complaint is that the action by Breath of filing anANDA infringes certain of AstraZeneca's patents directed to PulmicortTMRespulesTM and their use. In October 2005, AstraZeneca filed a similar lawsuitin the US District Court for the District of New Jersey against IVAXPharmaceuticals, Inc. (now known as Teva Pharmaceutical Industries Ltd.) forinfringement of AstraZeneca's patents covering PulmicortTM RespulesTM. AstraZeneca continues to have full confidence in and will vigorously defend andenforce its intellectual property protecting PulmicortTM RespulesTM. SeroquelTM (quetiapine fumarate) Product Liability As previously disclosed, AstraZeneca Pharmaceuticals LP, either alone or inconjunction with one or more affiliates, has been sued in numerous individualpersonal injury actions involving SeroquelTM. In most of these cases, the natureof the plaintiffs' alleged injuries is not clear from the complaint and in mostcases, little or no factual information regarding the alleged injury has beenprovided in the complaint. However, the plaintiffs generally contend that theydeveloped diabetes and/or other related injuries as a result of takingSeroquelTM and/or other atypical antipsychotic medications. As of 25 March 2008, AstraZeneca was defending 8,277 served or answered lawsuitsinvolving approximately 12,580 plaintiff groups. To date, approximately 1,949additional cases have been dismissed by order or agreement, about 1,500 of thosewith prejudice. No trial is expected until the first half of 2009. Patent Litigation As previously disclosed, AstraZeneca is involved in four pending patentinfringement cases against Teva and Sandoz in relation to SeroquelTM. Fact-discovery has ended for the four consolidated ANDA lawsuits. Expertdiscovery proceeds. Sandoz and Teva have each conceded that their respectiveANDA products infringe AstraZeneca's patent covering SeroquelTM. Sandoz and Tevahave each conceded the patent's validity and allege only unenforceability forinequitable conduct. In March 2008, the Court consolidated the three Teva actions with the Sandozaction for all purposes, including a joint trial, which the Court scheduled tobegin on 11 August 2008. The Court also granted leave to AstraZeneca to file a second motion for summaryjudgment. AstraZeneca filed its Motion for Summary Judgment of No InequitableConduct in March 2008. A hearing on AstraZeneca's motion is scheduled on 4 June2008. AstraZeneca continues to have full confidence in its intellectual propertyprotecting SeroquelTM and will vigorously defend and enforce it. Sales and marketing practices As previously disclosed, in February 2007, the Commonwealth of Pennsylvaniafiled suit against AstraZeneca, Eli Lilly & Co. (Lilly), and JanssenPharmaceutica Inc. (Janssen) claiming damages incurred by the Commonwealth as aresult of alleged off-label promotion of atypical antipsychotics by the threemanufacturers. The suits against AstraZeneca and Janssen were severed from thesuit against Lilly in December 2007. In February 2008, a similar lawsuit was filed by the Montana Attorney General.As is the case with the Pennsylvania suit, the Montana action seeks to recovercosts associated with alleged off-label promotion as well as costs associatedwith the treatment of state residents who developed diabetes as a result oftaking SeroquelTM. As of the date of this announcement, the Montana action hasnot been served. Average wholesale price class action litigation As previously disclosed, in January 2002, AstraZeneca was named as a defendantalong with 24 other pharmaceutical manufacturers in a class action suit inMassachusetts, brought on behalf of a putative class of plaintiffs alleged tohave overpaid for prescription drugs as a result of inflated wholesale listprices. AstraZeneca and other manufacturers have since been sued in similarlawsuits filed by the state Attorneys General of Pennsylvania, Nevada, Montana,Wisconsin, Illinois, Alabama, Kentucky, Arizona, Mississippi, Hawaii, Alaska,Idaho and Utah as well as by multiple individual counties in the state of NewYork. The average wholesale price (AWP) case filed by the Alabama Attorney General wastried in Circuit Court in Montgomery, Alabama from 11 February to 21 February2008. The trial resulted in a jury verdict against AstraZeneca on the State'sclaims of fraudulent concealment and misrepresentation, and an award ofcompensatory damages of $40 million and punitive damages of $175 million.Because the trial court committed multiple, reversible errors over the course ofthe trial, the Company believes that the verdict will likely be overturned uponappeal to the Alabama Supreme Court. In addition to filing the appeal,AstraZeneca will request that the trial court reduce the award of punitivedamages. By law, punitive damages are capped at three times compensatorydamages. No provision has been taken in respect of this for the first quarterof 2008. The allegations made in respect of the average wholesale price lawsuitsdescribed in this section are denied and will be vigorously defended. 6 ACCOUNTING IMPACT FROM MERCK ARRANGEMENTS Introduction In 1982, Astra AB set up a joint venture with Merck & Co., Inc. for the purposesof selling, marketing and distributing certain Astra products in the US. In1998, this joint venture was restructured (the "Restructuring"). Under theagreements relating to the Restructuring (the "Agreements"), a US limitedpartnership was formed, in which Merck is the limited partner and AstraZeneca isthe general partner, and AstraZeneca obtained control of the joint venture'sbusiness subject to certain limited partner and other rights held by Merck andits affiliates. These rights provide Merck with safeguards over the activitiesof the partnership and place limitations on AstraZeneca's commercial freedom tooperate. The Agreements provide for: • Annual contingent payments. • A payment to Merck in the event of a business combination between Astra and a third party in order for Merck to relinquish certain claims to that third party's products. • Termination arrangements which, if and when triggered, cause Merck to relinquish its interests in AstraZeneca's products and activities. Further details are set out in the 2007 Annual Report and Form 20-F Information. Payment made on 17 March 2008 On 17 March, under the termination arrangements included in the Agreements,AstraZeneca made a net cash payment to Merck of approximately $2.63 billion.This payment resulted in AstraZeneca acquiring Merck's interests in certainAstraZeneca products including PulmicortTM, RhinocortTM, SymbicortTM andToprol-XLTM. Consequently AstraZeneca no longer has to pay contingent paymentson these products to Merck and has obtained the ability to fully exploit theseproducts and to fully exploit other opportunities in the Respiratory therapyarea that AstraZeneca was previously prevented from doing by Merck's interestsin these products. Intangible assets aggregating to $994 million have beenrecognised in respect of these acquired product rights and these are beingamortised over various periods giving rise to an annual expense of approximately$60 million per annum. Approximately $50 million of this amortisation relatesto relief from contingent payments, and will be charged to Cost of Goods Sold,with the balance related to the Respiratory therapy area, which will be chargedto SG&A. For the purposes of calculating Core financial measures, the Companywill exclude only the amortisation expense related to therapy area intangibles(ie that charged to SG&A) from the Core financial measures calculations. The balance of the net payment made on 17 March represents payments on accountfor the product rights that will be acquired in the event that the First Optionand the Second Option (see below) are exercised by AstraZeneca. Intangibleassets aggregating to $1,656 million have been recognised. These balances arenot subject to amortisation until each of the options is exercised and therelated products rights are acquired. Should it become probable that the FirstOption will not be exercised, all the payments on account will be expensedimmediately. If after the First Option has been exercised it becomes probablethat the Second Option will not be exercised, the payments on account for theproduct rights to be acquired under the Second Option will be expensedimmediately. Further optional payments AstraZeneca has the right in 2010 to acquire Merck's interests in all theproducts still covered by the Agreements other than PrilosecTM and NexiumTM for$647 million ("the First Option"). These products comprise marketed products(EntocortTM, AtacandTM, PlendilTM, LexxelTM) and products still in development(including AZD6140, AZD3355, AZD0328 and AZD2327). If the First Option isexercised, AstraZeneca will no longer have to pay contingent payments on theseproducts to Merck and will obtain the ability to fully exploit these productsand to fully exploit other opportunities in the Cardiovascular and Neurosciencetherapy areas that AstraZeneca was previously prevented from doing by Merck'sinterests in these products. If the First Option is exercised, this will giverise to an additional amortisation expense in the range of $15 to $50 millionper annum charged to COGS, the precise amount dependent upon the launch statusof the covered pipeline compounds, and an additional charge to SG&A of around$60 million. Provided that the First Option is exercised, AstraZeneca may exercise a furtheroption ("the Second Option") two years later (or in 2017, or if combined annualsales of the two products fall below a minimum amount) which will end thecontingent payments in respect of NexiumTM and PrilosecTM and effectively endAstraZeneca's relationship with and obligations to Merck (other than someresidual manufacturing arrangements). The exercise price for the Second Optionis the net present value of the future annual contingent payments on PrilosecTMand NexiumTM as determined at the time of exercise. If the Second Option isexercised then amortisation related to the ability to exploit opportunities inthe Gastrointestinal therapy area will commence, in the amount of $15 millionper annum (charged to SG&A), as well as an as yet indeterminable amount ofamortisation related to relief from contingent payments. The intangible assets relating to purchased product rights and the intangibleassets relating to payments on account will be subject to impairment testing andwould be partially or wholly impaired if a product is withdrawn or if activityin any of the affected therapy areas is significantly curtailed. 7 FIRST QUARTER TERRITORIAL SALES ANALYSIS % Growth 1st Quarter 1st Quarter Constant 2008 2007 Actual Currency $m $m US 3,401 3,234 5 5 Canada 322 254 27 9 North America 3,723 3,488 7 5 Western Europe** 2,405 2,200 9 (1) Japan 378 331 14 4 Other Established ROW 190 133 43 26 Established ROW* 2,973 2,664 12 1 Emerging Europe 287 246 17 2 China 133 92 45 35 Emerging Asia Pacific 204 169 21 15 Other Emerging ROW 357 307 16 9 Emerging ROW 981 814 21 11 Total Sales 7,677 6,966 10 4 * Established ROW comprises Western Europe (including France, UK, Germany,Italy, Sweden and others), Japan, Australia and New Zealand. ** For the first quarter, Western Europe sales growth excluding SynagisTM wouldbe 7 percent on an actual basis and -4 percent on a constant currency basis. 8 FIRST QUARTER PRODUCT SALES ANALYSIS World US 1st 1st Constant 1st Quarter Quarter Actual Currency Quarter Actual 2008 2007 Growth Growth 2008 Growth $m $m % % $m % Gastrointestinal:Nexium 1,238 1,308 (5) (9) 736 (15)Losec/Prilosec 252 279 (10) (16) 47 (13)Others 20 20 - (5) 6 (14) Total Gastrointestinal 1,510 1,607 (6) (10) 789 (15) Cardiovascular:Crestor 772 628 23 16 353 3Seloken/Toprol-XL 190 444 (57) (60) 64 (81)Atacand 346 296 17 7 62 (5)Tenormin 70 71 (1) (10) 5 -Zestril 59 80 (26) (33) 4 (50)Plendil 66 65 2 (6) 6 (14)Others 68 69 (1) (10) 1 - Total Cardiovascular 1,571 1,653 (5) (11) 495 (35) Respiratory:Symbicort 471 354 33 21 44 n/mPulmicort 411 401 2 (1) 275 2Rhinocort 80 92 (13) (16) 49 (22)Oxis 17 23 (26) (35) - -Accolate 18 19 (5) (5) 12 (14)Others 43 42 2 (7) - - Total Respiratory 1,040 931 12 5 380 10 Oncology:Arimidex 430 401 7 2 183 13Casodex 316 310 2 (5) 66 (10)Zoladex 255 249 2 (6) 16 (27)Iressa 58 52 12 4 2 (33)Ethyol 14 - n/m n/m 14 n/mOthers 92 84 10 4 40 3 Total Oncology 1,165 1,096 6 (1) 321 7 Neuroscience:Seroquel 1,050 923 14 10 702 7Local anaesthetics 138 126 10 (1) 8 -Zomig 107 107 - (7) 44 (6)Diprivan 68 59 15 7 11 22Others 15 12 25 17 3 50 Total Neuroscience 1,378 1,227 12 7 768 7 Infection and Other:Synagis 519 - n/m n/m 456 n/mMerrem 213 178 20 12 46 31FluMist - - n/m n/m - n/mOther Products 55 74 (26) (28) 29 (24) Total Infection and Other 787 252 212 206 531 627 Aptium Oncology 98 98 - - 98 -Astra Tech 128 102 25 16 19 46 Total 7,677 6,966 10 4 3,401 5 Shareholder Information ANNOUNCEMENTS AND MEETINGS Annual General Meeting 24 April 2008Announcement of second quarter and half year 2008 results 31 July 2008Announcement of third quarter and nine months 2008 30 October 2008results DIVIDENDS Future dividends will normally be paid as follows:First interim Announced in July and paid in SeptemberSecond interim Announced in January and paid in March TRADEMARKS The following brand names used in these interim financial statements aretrademarks of the AstraZeneca Group of companies: Accolate Arimidex Astra Tech Atacand Casodex Crestor Diprivan EthyolFaslodex FluMist Iressa Lexxel Losec Merrem Nexium Nolvadex OxisPlendil Prilosec Pulmicort Pulmicort Flexhaler Pulmicort Respules PulmicortTurbuhaler Recentin Rhinocort Seloken Seroquel Seroquel XR SymbicortSymbicort SMART Synagis Tenormin Toprol-XL Zactima Zestril Zoladex Zomig ADDRESSES FOR CORRESPONDENCE Registrar and Depositary Swedish SecuritiesTransfer Office for ADRs Registered Office Registration CentreThe AstraZeneca Registrar JPMorgan Chase Bank 15 Stanhope Gate VPC ABEquiniti Limited JPMorgan Service Center London PO Box 7822Aspect House PO Box 3408 W1K 1LN SE-103 97 StockholmSpencer Road South Hackensack UK SwedenLancing NJ 07606-3408West Sussex USBN99 6DAUK Tel (toll free in US): Tel: +44 (0)20 7304 5000 Tel: +46 (0)8 402 9000Tel (freephone in UK): 888 697 80180800 389 1580 Tel: +1 (201) 680 6630Tel (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 SecuritiesLitigation Reform Act 1995, we are providing the following cautionary statement:These interim financial statements contain certain forward-looking statementsabout AstraZeneca. Although we believe our expectations are based on reasonableassumptions, any forward-looking statements may be influenced by factors thatcould cause actual outcomes and results to be materially different from thosepredicted. We identify the forward-looking statements by using the words 'anticipates', 'believes', 'expects', 'intends' and similar expressions in suchstatements. These forward-looking statements are subject to numerous risks anduncertainties. Important factors that could cause actual results to differmaterially from those contained in forward-looking statements, certain of whichare beyond our control, include, among other things: the loss or expiration ofpatents, marketing exclusivity or trade marks; the risk of substantial adverselitigation/government investigation claims and insufficient insurance coverage;exchange rate fluctuations; the risk that R&D will not yield new products thatachieve commercial success; the risk that strategic alliances will beunsuccessful; the impact of competition, price controls and price reductions;taxation risks; the risk of substantial product liability claims; the impact ofany failure by third parties to supply materials or services; the risk offailure to manage a crisis; the risk of delay to new product launches; thedifficulties of obtaining and maintaining regulatory approvals for products; therisk of failure to observe ongoing regulatory oversight; the risk that newproducts do not perform as we expect; the risk of environmental liabilities; therisks associated with conducting business in emerging markets; the risk ofreputational damage; and the risk of product counterfeiting. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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