23rd Apr 2007 07:02
AstraZeneca PLC23 April 2007 AstraZeneca PLC First Quarter Results 2007 "First quarter sales up 9 percent and Earnings per Share up 14 percent. Ontrack to achieve full year financial targets." Financial Highlights Group 1st Quarter 1st Quarter Actual CER 2007 2006 % % $m $m Sales 6,966 6,180 +13 +9 Operating Profit 2,170 1,976 +10 +10 Profit before Tax 2,267 2,044 +11 +11 Earnings per Share $1.02* $0.90 +13 +14 Adjusted to excludeToprol-XLTM in US**Sales 6,635 5,826 +14 +10Earnings per Share $0.89* $0.79 +14 +14 *Includes ($0.04) restructuring charge associated with the supply chain productivity initiative. *\* This Non-GAAP presentation excludes US sales and earnings contribution from Toprol-XLTM from both current and prior year period. All narrative in this section refers to growth rates at constant exchange rates(CER) • Earnings per Share, before restructuring charges, were $1.06 ($0.93 adjusted to exclude Toprol-XLTM). • First quarter sales increased by 9 percent to $6,966 million and operating profit increased by 10 percent to $2,170 million. Excluding the $82 million charge to cost of sales associated with the previously announced supply chain productivity initiative, operating profit increased by 15 percent. • Combined sales of five key growth products (NexiumTM, SeroquelTM, CrestorTM, ArimidexTM and SymbicortTM) increased by 17 percent to $3,614 million. • Free cash flow of $1,907 million in the first quarter. Cash distributions to shareholders, including net share repurchases of $1,151 million, totalled $3,029 million in the quarter. • The Company expects to launch SymbicortTM in the US around the middle of this year. • On 25 March at the Scientific Sessions of the American College of Cardiology, data from the METEOR trial of CrestorTM was presented, demonstrating that CrestorTM treatment slowed progression of atherosclerosis in people with early signs of carotid artery disease and at low risk of coronary artery disease. • As previously announced, the ARISE trial did not meet its primary endpoint. After completion of the final study analysis, and under the terms of the licensing and collaboration agreement, the Company has confirmed to AtheroGenics Inc. that it has decided to terminate the licensing and collaboration agreement. Charges totalling $83 million have been taken in conjunction with this decision. • On 23 April, the Company announced it is to acquire MedImmune, Inc. for $58 per share in an all cash transaction with a total enterprise value of $15.2 billion. David Brennan, Chief Executive Officer, said: "We continue to deliver on ourthree strategic priorities: with a good sales and earnings performance in thefirst quarter, we are on track to achieve our full year targets; we continue ourefforts to strengthen the pipeline - our number one priority; and the entireorganisation is rising to the productivity challenge. This constitutes a goodstart to the year, building on sound foundations established over the last 3years." London, 23 April 2007 Media Enquiries: Steve Brown/Edel McCaffrey (London) (020) 7304 5033/5034 Staffan Ternby (Sodertalje) (8) 553 26107 Emily Denney (Wilmington) (302) 886 3451 Analyst/Investor Enquiries: Mina Blair (London)/Karl Hard (London) (020) 7304 5084/5322 Jonathan Hunt (London) (020) 7304 5087 Staffan Ternby (Sodertalje) (8) 553 26107 Ed Seage/Jorgen Winroth (US) (302) 886 4065/(212) 579 0506 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 9 percent at CER, or 13 percent on an asreported basis (including an exchange benefit of 4 percent). Sales in the USwere up 12 percent (up 15 percent excluding sales of Toprol-XLTM from bothperiods). Outside the US, sales were up 7 percent as a result of strongdouble-digit sales growth in Emerging Markets and Japan. Sales in WesternEurope were up 4 percent. Operating profit in the first quarter was up 10 percent, with currency movementshaving minimal effect on this growth rate. Operating margin, at 31.2 percent ofsales, was 0.8 percentage points lower than first quarter last year, includingan adverse exchange impact of 1.2 percentage points. A charge of $82 million,out of the approximately $500 million supply chain rationalisation programmeannounced in February, is included in cost of sales in the quarter. Excludingthis charge, operating profit increased by 15 percent. Operating margin also includes charges of $93 million comprising fixed assetsand supplier commitments relating to the termination of the AGI-1067collaboration ($24 million) and $69 million related to write-offs of intangibleassets associated with the return of rights to AZD2479 to Avanir Pharmaceuticalsand the decision to end the collaboration on AGI-1067. Expenditure on Researchand Development was up 26 percent at CER. SG&A expense was unchanged from thefirst quarter last year. Earnings per share in the first quarter were $1.02 compared with $0.90 in thefirst quarter 2006, an increase of 14 percent at CER. Excluding the profitcontribution from US sales of Toprol-XLTM from both periods, earnings per sharealso increased by 14 percent, from $0.79 to $0.89. The combined sales of five key growth products (NexiumTM, SeroquelTM, CrestorTM,ArimidexTM, and SymbicortTM) grew by 17 percent in the first quarter to $3,614million. NexiumTM sales were up 8 percent to $1,308 million. Sales were up 9 percent inthe US, broadly in line with dispensed tablet growth. Sales in other marketswere up 5 percent, affected by the significant price erosion and lowerunderlying demand in Germany. SeroquelTM sales increased 13 percent to $923 million. Expanding use in bipolardisorder in the US has resulted in a further increase in US market share duringthe quarter, reaching 31 percent in March. US sales were up 11 percent. Salesin other markets increased by 17 percent. CrestorTM sales reached $628 million in the first quarter, an increase of 59percent over last year. Sales in the US were up 56 percent and sales in othermarkets were up 62 percent. Data from the METEOR clinical trial were presentedat the American College of Cardiology meeting on 25 March. This is the firststudy to show positive benefit on atherosclerosis for people with early signs ofdiseased arteries. The data show that CrestorTM treatment slowed theprogression of atherosclerosis in people at low risk of coronary artery disease. Atherosclerosis regulatory submissions are under review in the European Unionand the United States. ArimidexTM sales increased 15 percent to $401 million. SymbicortTM sales wereup 19 percent. The Company expects to launch SymbicortTM in the US around themiddle of this year. Future Prospects Current performance trends are consistent with achieving the financial targetsset at the beginning of the year. The target range of $3.80 to $4.05 per shareexcludes any contribution from US sales of Toprol-XLTM and does not include anyone-off costs associated with productivity initiatives. In the first quarter,US sales of Toprol-XLTM contributed $0.13 per share to earnings. Also in thefirst quarter, $82 million (approximately $0.04 per share) associated with thesupply chain rationalisation programme announced in February was charged to costof sales. Adjusting the earnings target for these two items results inanticipated EPS in the range of $3.89 to $4.14 for the full year. This rangeassumes no further contribution from Toprol-XLTM for the balance of the year,and does not include any additional restructuring charges that may arise fromthe productivity initiatives. Under the current scenario of generic competition on just the 25mg tablet,profit contribution for US sales of the Toprol-XLTM product range is running ataround $100 million per month; this estimate will be updated as marketconditions change. Approximately $250 million of the $500 million supply chain rationalisationprogramme announced in February is expected to be incurred in 2007. 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: when and if additional generic competitors to Toprol-XLTM areintroduced in the US market prior to completion of Appellate Court process, therate of growth in sales of generic omeprazole in the US, continued growth incurrently marketed products (in particular CrestorTM, NexiumTM, SeroquelTM,SymbicortTM and ArimidexTM), the growth in costs and expenses, interest ratemovements, exchange rate fluctuations, and the tax rate. For further details onthese and other risks and uncertainties, see AstraZeneca PLC's Securities andExchange Commission filings, including the 2006 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 % 2007 2006 NexiumTM 1,308 1,189 +8LosecTM/ PrilosecTM 279 344 -22Total 1,607 1,551 +1 • In the US, NexiumTM sales in the first quarter were $862 million, a 9 percent increase that was broadly in line with the increase in dispensed tablet volume. Realised prices were broadly unchanged. In contrast, other branded PPI's declined by 1 percent in volume terms. • NexiumTM sales in other markets increased 5 percent, as a 28 percent increase in Emerging Markets helped mitigate the significant price erosion and declining volumes in Germany. • PrilosecTM sales in the US were down 2 percent in the first quarter. LosecTM sales in other markets were down 26 percent on declining sales in Canada and Western Europe. Cardiovascular First Quarter CER % 2007 2006 SelokenTM / Toprol-XLTM 444 456 -4CrestorTM 628 387 +59AtacandTM 296 254 +11PlendilTM 65 72 -14ZestrilTM 80 75 +1Total 1,653 1,390 +16 • In the US, CrestorTM sales in the first quarter were $343 million, a 56 percent increase over last year. Total prescriptions in the US statin market increased by 11 percent in the first quarter; CrestorTM prescriptions were up 46 percent. CrestorTM share of total prescriptions in the US statin market was 8.8 percent in March 2007. • CrestorTM sales in other markets were up 62 percent to $285 million. Sales in Western Europe were up 46 percent; sales in Emerging Markets increased by 88 percent. Volume share of the statin market for CrestorTM is now 18.5 percent in Canada; 11.6 percent in the Netherlands; 20.2 percent in Italy; and 13.6 percent in France. • Data from the METEOR clinical trial were presented at the American College of Cardiology meeting on 25 March. This is the first study to show positive benefit on atherosclerosis for people with early signs of diseased arteries. The data show that CrestorTM treatment slowed the progression of atherosclerosis in people at low risk of coronary artery disease. Atherosclerosis regulatory submissions are under review in the European Union and the United States. • US sales of the Toprol-XLTM product range, which includes sales of the authorised generic to Par, were $331 million, down 7 percent compared to the first quarter last year. Generic competition was confined to the 25mg dose during the quarter; these generic products accounted for 20 percent of dispensed prescriptions across the entire product range. • Sales of SelokenTM in other markets were up 6 percent as a result of an 11 percent increase in Emerging Markets. • AtacandTM sales in the US were up 12 percent; sales in other markets were up 11 percent. Respiratory and Inflammation First Quarter CER % 2007 2006 PulmicortTM 401 328 +20SymbicortTM 354 277 +19RhinocortTM 92 85 +6OxisTM 23 22 -5AccolateTM 19 18 +6Total 931 765 +17 • Sales of SymbicortTM increased 19 percent to $354 million as a result of share gains in a growing market. Sales in Western Europe were up 18 percent and sales in Emerging Markets were up 28 percent in the first quarter. • The Company expects to launch SymbicortTM in the US for the maintenance treatment of asthma in patients aged 12 and above around the middle of this year. • PulmicortTM sales in the US were up 29 percent in the first quarter, to $270 million. Volume growth for PulmicortTM RespulesTM in the US was 16 percent. US sales in the first quarter also included initial stocking sales for the new PulmicortTM FlexhalerTM dry powder inhaler. The introduction of PulmicortTM FlexhalerTM will be accompanied by the phasing out of PulmicortTM TurbuhalerTM in the US as supplies run down in the market. • PulmicortTM sales in other markets were up 4 percent as a result of sales growth in Japan and China. Oncology First Quarter CER % 2007 2006 ArimidexTM 401 335 +15CasodexTM 310 274 +9ZoladexTM 249 231 +4IressaTM 52 50 +4FaslodexTM 49 44 +7NolvadexTM 19 21 -10Total 1,096 958 +11 • In the US, sales of ArimidexTM were up 27 percent in the first quarter, to $162 million. Total prescriptions for ArimidexTM increased 11 percent over the first quarter last year, and ArimidexTM market share of total prescriptions reached 37.8 percent in March. The reported sales growth rate benefited from some inventory destocking in the first quarter 2006. • ArimidexTM sales in other markets were up 8 percent. Sales in Western Europe increased by 4 percent, as double-digit volume growth was offset by lower prices. Sales in Japan were up 19 percent. • US sales of CasodexTM were up 11 percent in the first quarter. Sales in other markets were up 9 percent, on a 10 percent increase in Western Europe and a 17 percent sales increase in Japan. • IressaTM sales were up 4 percent to $52 million. Sales in Japan were up 14 percent and sales increased 50 percent in China. • The 7 percent sales increase for FaslodexTM in the quarter was a result of the 16 percent increase in sales outside the US. US sales were unchanged in the quarter as a small increase in volume was offset by inventory movements and movements in returns reserves. Neuroscience First Quarter CER % 2007 2006 SeroquelTM 923 807 +13ZomigTM 107 93 +11Total 1,227 1,136 +6 • In the US, SeroquelTM sales were up 11 percent to $655 million. Total prescriptions were up 12 percent in the first quarter, and SeroquelTM market share of total prescriptions in the US antipsychotic market was 31 percent in March, up a further 0.5 percentage points from December 2006. Usage in bipolar disorder continues to increase, fuelled by the approval for bipolar depression late last year, although the dollar value per prescription for bipolar depression is lower as a result of the lower doses prescribed for this indication. • SeroquelTM sales in other markets were up 17 percent, in line with sales growth rates in Western Europe and in Emerging Markets. • In March, clinical trial data for SeroquelTM sustained release formulation were presented at the European Congress of Psychiatry in Madrid. These data demonstrated that the SeroquelTM sustained release formulation, administered once daily, significantly improved symptoms associated with schizophrenia and increased the time to psychiatric relapse, when administered through a three-step dose titration aimed at reaching the effective dose range on the second day of treatment. Regulatory filings for the treatment of schizophrenia with SeroquelTM sustained release formulation were submitted to authorities in the US, European Union, and other markets in 2006. • Sales of ZomigTM in the first quarter were up 18 percent in the US and were up 6 percent in other markets. Geographic Sales First Quarter CER % 2007 2006 North America 3,488 3,132 +11 US 3,234 2,882 +12Established ROW* 2,664 2,355 +5Emerging ROW 814 693 +14 *Established ROW comprises Western Europe (including France, UK, Germany, Italy,Sweden, and others), Japan, Australia and NewZealand. • The sales increase in North America was driven by the 12 percent increase in sales in the US, with Crestor TM, SeroquelTM and NexiumTM the three largest contributors to the increase. • Sales in the Established Rest of World segment are in line with the 4 percent increase in Western Europe. Sales in Japan were up 12 percent compared with the first quarter last year, which experienced destocking ahead of the April price decreases. • Within the Emerging Markets segment, sales in Emerging Europe were unchanged. Sales in China were up 25 percent. Operating Review All narrative in this section refers to growth rates at constant exchange rates(CER) unless otherwise indicated Operating Results Reported sales increased by 13 percent and operating profit by 10 percent. Atconstant exchange rates, sales increased by 9 percent and operating profit by 10percent. Excluding the restructuring costs described below operating profitincreased by 15 percent. Currency movements increased sales by 4 percent but had minimal impact onoperating profit. In comparison to last year, the dollar was 8 percent weakeragainst the euro, increasing sales, and also against the Swedish krona (10percent) and sterling (10 percent), increasing costs. The net effect of thesecurrency movements was a negative impact of less than 1 cent on earnings pershare. If current exchange rates are maintained for the remainder of the year,it is anticipated that there will be a small negative EPS impact. Underlying US sales growth is broadly in line with reported growth of 12 percentafter adjusting for managed market accruals, inventory movements and provisionmovements. Outside the US, sales increased by 7 percent. Reported operating margin decreased by 0.8 percentage points from 32.0 percentto 31.2 percent. Excluding the effects of currency, underlying margin increased0.4 percentage points for the quarter. Reported gross margin of 78.7 percent is 1.1 percentage points lower than lastyear. Payments to Merck, at 4.4 percent of sales, were 0.2 percentage pointslower than last year. Currency and royalty payments reduced margin by 0.1 and0.4 percentage points respectively. Included in quarter one were provisions of$82 million in respect of the global supply chain productivity initiativesannounced in February and $24 million for fixed assets and supplier commitmentsrelating to termination of AGI-1067 development. Taking all these factorstogether, underlying gross margin increased by 0.7 percentage points, primarilydue to continuing operational efficiencies. R&D expenditure was $1,170 million in the quarter, up 26 percent over last yeardue principally to increased activity levels, the effect of the externalisationstrategy and intangible impairment provisions totalling $69 million in respectof collaborations with AtheroGenics (AGI-1067) and Avanir (Reverse CholesterolTransport enhancing compounds). In comparison to the first quarter 2006, R&D asa percentage of sales increased 2.9 percentage points to 16.8 percent, of whichcurrency accounted for 0.7 percentage points. At constant rates of exchange, SG&A costs of $2,217 million were in line withquarter one in 2006. In comparison to the first quarter 2006, SG&A as apercentage of sales fell by 2.4 percentage points to 31.8 percent of sales, ofwhich currency accounted for 0.4 percentage points. Other income of $138 million was $61 million higher than the first quarter in2006 and increased operating margin by 0.8 percentage points. The increase wasprimarily due to unanticipated insurance recoveries offset by expectedreductions in royalty income. Included within cost of sales is the movement in the fair value of financialinstruments used to manage our transactional currency exposures; the net gain inthe quarter was $1 million (compared with a loss of $1 million for the sameperiod last year). Other fair value movements of $1 million are chargedelsewhere in the income statement. Toprol-XLTM In quarter one, Toprol-XLTM combined with the authorised generic contributed USsales of $331 million and EPS of $0.13. The timing of entry to the markets ofother proposed generic products is difficult to predict; as a result, theCompany believes that future performance can be best judged by excludingToprol-XLTM from current performance. Consequently, if Toprol-XLTM wereexcluded from the current and prior year, sales growth would be 10 percent andEPS growth would be 14 percent on a CER basis. Productivity Initiatives In February 2007, the Company announced a programme to improve asset utilisationwithin its global supply chain. The programme is anticipated to span athree-year period, and cost approximately $500 million (of which approximately$300 million will be cash). Approximately $250 million is expected to beincurred in 2007, of which cash restructuring costs of $82 million were chargedto cost of sales in the first quarter. Over the remainder of the year, further restructuring initiatives will beundertaken to improve the long-term efficiency of the business. Interest and Dividend Income Net interest and dividend income for the quarter was $97 million, compared with$68 million for the same period last year. The increase over quarter one lastyear is primarily attributable to higher average investment balances and yields.The reported amounts include $8 million (2006 $11 million) arising from employeebenefit fund assets and liabilities reported under IAS 19, "Employee Benefits". Taxation The effective tax rate for the quarter is 31.0 percent compared with 30.3percent for the same period last year and 29.0 percent for 2006. The increase inthe tax rate is due to a different geographical mix of profits and a lower levelof tax relief in respect of share based payments. For the full year the tax rateis anticipated to be around 29 percent. Cash Flow Free cash flow (net cash generated and available for acquisitions ordistribution to shareholders) for the quarter was $1,907 million, compared to$1,336 million in 2006. $3,029 million was returned to shareholders (through netshare repurchases of $1,151 million and the dividend payment of $1,878 million)and $143 million was invested in the acquisition of Arrow Therapeutics Limited,leading to an overall decrease in net funds of $1,265 million for the quarter. Cash generated from operating activities in the first quarter was $2,187million, $675 million higher than in 2006. This was driven partly by increasedprofit before tax and also by a reduction in working capital outflows comparedto 2006, which is due to the timing of payments to suppliers, offset by outflowsfrom higher trade recoverables. Net cash outflows from investing activities were $616 million in the quarter,compared to $1,903 million in 2006. This reduction substantially reflects thereallocation of funds between cash equivalents and short-term deposits; aftereliminating this effect, the net outflow reflects increased expenditure onintangible assets arising from new externalisation deals. Investments In January, the Company capitalised $100 million relating to the collaborationwith Bristol-Myers Squibb (BMS) in respect of the two investigational compoundsfor the treatment of Type 2 Diabetes, saxagliptin and dapagliflozin. Also in January, the Company announced an exclusive global licensing andresearch collaboration with Palatin Technologies Inc. to discover, develop andcommercialise small molecule compounds that target melanocortin receptors forthe treatment of obesity and related indications. The $10 million upfrontpayment has been capitalised as an intangible asset. In February, the Company completed the acquisition of Arrow Therapeutics Limitedat a net cost of $143 million, strengthening its portfolio of promisinganti-infective treatments from external opportunities and providing a widelyrecognised expert group and technology platform in an area of research thatcomplements internal capabilities in anti-bacterials. In March, a further milestone payment of $20 million was accrued in relation tothe collaboration with Protherics Plc. This was payable upon the successfulscale-up of the manufacturing process under the development andcommercialisation agreement for the anti-sepsis product CytoFabTM. Share Repurchase Programme During the first quarter, 21.1 million shares were repurchased for cancellationat a total cost of $1,184 million. 0.7 million shares were issued, inconsideration of share option exercises and in relation to employee share plans,for a total of $33 million. The total number of shares in issue at 31 March 2007 is 1,512 million. The share buy back programme is calculated to have added 2 cents to EPS for thequarter, after allowing for an estimate of interest income foregone. R&D Update In January, the Company and Palatin Technologies Inc. announced an exclusiveglobal licensing and research collaboration to discover, develop andcommercialise small molecule compounds that target melanocortin receptors. Thisprogramme offers significant potential for the development of novel treatmentsfor obesity, diabetes and metabolic syndrome. During the first quarter, the Company's collaboration partner Protherics Inc.successfully scaled up the manufacturing process for CytoFabTM to a 600 litrebatch size. This will enable the start of the expanded Phase II clinicalprogramme in the second half of the year as planned. As previously announced, the phase III ARISE trial, a clinical outcomes trialwhich studied AGI-1067, an investigational anti-atherosclerosis agent fromAtheroGenics, Inc., did not meet its primary endpoint. After completion of thefinal study analysis, and under the terms of the licensing and collaborationagreement, the Company has confirmed to AtheroGenics Inc. that it has decided toterminate the licensing and collaboration agreement. On 16 April, the Company announced that agreement has been reached between KuDOSPharmaceuticals Ltd., which is a wholly owned subsidiary of AstraZeneca UK Ltd.,Novacea Inc. and BTG plc regarding future development of AQ4N (Bonoxantrone,AZD1689). Novacea will acquire exclusive rights for the worldwide developmentof AQ4N, including countries (outside of North America) which were formerlyexclusively licensed to KuDOS. Development of AZD9684, a CPU inhibitor being investigated as a treatment forthrombosis, has been discontinued. The Company and Avanir Pharmaceuticals have mutually agreed to end theirresearch collaboration and license agreement on the Reverse CholesterolTransport compounds. As a consequence, the Company will discontinue furtherdevelopment of the Phase I compound AZD2479. Calendar 26 July 2007 Announcement of second quarter and half year 2007 results 1 November 2007 Announcement of third quarter and nine months 2007 results David Brennan Chief Executive Officer This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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