27th Oct 2005 11:00
AstraZeneca PLC27 October 2005 AstraZeneca PLCThird Quarter and Nine Months Results 2005 "A strong third quarter with sales up 9 percent and Earnings per Share up 52 percent: year end targets increased." Financial Highlights Group 3rd Quarter 3rd Quarter Actual CER 9 Months 9 Months Actual CER 2005 2004 % % 2005 2004 % % $m $m $m $m Sales 5,789 5,265 +10 +9 17,664 15,627 +13 +10 Operating Profit 1,695 1,172 +45 +45 4,866 3,276 +49 +44 Profit before Tax 1,743 1,419* +23 +23 4,978 3,549* +40 +36 Earnings per Share: Before non-recurring items $0.76 $0.51 +49 +52 $2.14 $1.46 +46 +42 Statutory $0.76 $0.68* +12 +13 $2.14 $1.63* +31 +27 * There were two non-recurring items in Q3 2004, which benefited profit beforetax by $219 million and earnings per share by $0.17. Excluding these benefits,earnings per share increased 52 percent at CER in the third quarter and 42percent for the nine months compared with 2004. All narrative in this section refers to growth rates at constant exchange rates(CER) unless otherwise indicated • Third quarter sales increased by 9 percent to $5,789 million and operating profit increased by 45 percent to $1,695 million. • Sales increase was driven by the strong performance of 5 key growth products (NexiumTM, CrestorTM, SymbicortTM, ArimidexTM and SeroquelTM) whose combined sales increased by 25 percent. • Sales for the nine months increased by 10 percent and operating profit by 44 percent. Operating margin for the nine months was 27.5 percent of sales. • Free cash flow of $4,294 million for the nine months. Share repurchases totalled $2,182 million year to date. • NexiumTM sales in the third quarter were $1,127 million, up 18 percent. • CrestorTM sales in the third quarter were $325 million, up 23 percent. In the week ending 14 October, CrestorTM share of new prescriptions in the US statin market was 6.8 percent. • SymbicortTM sales in the third quarter were $240 million, up 28 percent. US regulatory application for the pMDI formulation for the treatment of asthma was submitted on 23 September. • ArimidexTM sales in the third quarter were $303 million, up 36 percent. Share of total prescriptions in the US market is up 6.3 percentage points since December. • SeroquelTM sales in the third quarter were $706 million, up 32 percent. • The Company now anticipates earnings per share between $2.85 and $2.95 for the full year. Sir Tom McKillop, Chief Executive, said: "A continued strong sales performance,especially for the five key growth products, together with benefits arising fromproductivity initiatives across the entire Company has produced an outstandingresult for the nine months, and is reflected in an increase in our financialtargets for the full year." London, 27 October 2005 Media Enquiries: Steve Brown/Edel McCaffrey (London) (020) 7304 5033/5034 Staffan Ternby (Sodertalje) (8) 553 26107 Rachel Bloom-Baglin (Wilmington) (302) 886 7858 Analyst/Investor Enquiries: Mina Blair (London) (020) 7304 5084 Jonathan Hunt (London) (020) 7304 5087 Staffan Ternby (Sodertalje) (8) 553 26107 Ed Seage/Jorgen Winroth (US) (302) 886 4065/(212) 579 0506 Photos of Jonathan Symonds, Chief Financial Officer are available onwww.newscast.co.uk. Broadcast footage of AstraZeneca products and activities isavailable on www.thenewsmarket.com/astrazeneca Business Highlights All narrative in this section refers to growth rates atconstant exchange rates (CER) unless otherwise indicated Third Quarter Sales in the third quarter increased by 9 percent at CER, or 10 percent on an asreported basis (including an exchange benefit of 1 percent), with good salesgrowth in all regions (US up 9 percent; Europe up 8 percent; Japan up 6 percent;Rest of World up 13 percent). Combined expenditures in R&D and SG&A were up 2 percent at CER and as reported,with currency having no impact. Operating profit in the third quarter was up 45percent. Earnings per share were $0.76 versus $0.68 in 2004, which included$0.17 in non-recurring benefits from a disposal gain and a tax credit.Excluding these items from last year, third quarter earnings per share increased52 percent. Sales growth was driven by the strong performance of 5 key growth products(NexiumTM, CrestorTM, SymbicortTM, ArimidexTM and SeroquelTM) whose combinedsales increased 25 percent to $2,701 million. NexiumTM sales were up 18 percent to $1,127 million on good growth in the US (up17 percent) and in other markets (up 19 percent). CrestorTM sales in the quarter increased 23 percent to $325 million, including$189 million in the US. CrestorTM share of new prescriptions in the US statinmarket was 6.8 percent in the week ending 14 October, up from 5.9 percent forthe month of June. SymbicortTM sales were $240 million, up 28 percent. The US regulatoryapplication for the pMDI formulation of SymbicortTM for the treatment of asthmawas submitted on 23 September. Quarterly sales for ArimidexTM exceeded $300 million for the first time (up 36percent to $303 million), building upon its market leading position amongaromatase inhibitors for the treatment of breast cancer. SeroquelTM sales were $706 million, on strong growth in the US (up 30 percent)and in other markets (up 41 percent). Since September, the Company has received notifications containing paragraph IVcertifications alleging invalidity and non-infringement in respect of certain ofAstraZeneca's patents relating to PulmicortTM RespulesTM, SeroquelTM, andNexiumTM. The Company continues to have full confidence in its intellectualproperty protecting these products. Nine Months For the nine months, sales increased 10 percent at CER, or 13 percent on an asreported basis (including an exchange benefit of 3 percent). Sales increased 13percent in the US and were up 8 percent in other markets. Sales growth for thenine months was fuelled by NexiumTM (up 20 percent), CrestorTM (up 51 percent),SymbicortTM (up 22 percent), ArimidexTM (up 45 percent) and SeroquelTM (up 35percent). Combined sales for these five products were $7,905 million, up 29percent. The sustained focus on productivity throughout the organization continues toyield benefits ahead of initial expectations. The 44 percent increase inoperating profit derives from strong sales growth and the impact of ongoingproductivity gains. Activity-related costs, particularly in R&D, are lower yearto date, but will increase as larger scale clinical trials commence in supportof an emerging late stage product pipeline, including ZactimaTM and AZD2171.Earnings per share were $2.14 compared with $1.63 last year. Excluding the$0.17 in non-recurring gains in 2004, earnings per share increased by 42 percentfor the nine months. Future Prospects The Company continues to anticipate sales growth around the double digits markfor the full year in constant currency terms. This sales growth, combined withexcellent progress in improving productivity, should result in earnings pershare for the full year between $2.85 and $2.95. 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 omeprazole in the US,continued growth in currently marketed products (in particular CrestorTM,NexiumTM, SeroquelTM, SymbicortTM, ArimidexTM and CasodexTM), the growth incosts and expenses, interest rate movements, exchange rate fluctuations and thetax rate. For further details on these and other risks and uncertainties, seeAstraZeneca PLC's Securities and Exchange Commission filings, including the 2004Annual Report on Form 20-F. Sales All narrative in this section refers to growth rates at constant exchange rates(CER) unless otherwise indicated Gastrointestinal Third Quarter CER % Nine Months CER % 2005 2004 2005 2004 LosecTM/ PrilosecTM 376 430 -15 1,241 1,501 -20NexiumTM 1,127 951 +18 3,386 2,777 +20 Total 1,518 1,407 +7 4,678 4,342 +6 • Third quarter sales for NexiumTM in the US were up 17 percent versus the third quarter 2004, which was affected by some wholesaler destocking. Dispensed tablet growth of 13 percent was partially offset by lower realised prices. NexiumTM share of total prescriptions in the US PPI market was 29.1 percent in September, up 2.2 percentage points since December. • US sales for NexiumTM for the nine months were up 18 percent. • Sales of NexiumTM in other markets were up 19 percent in the quarter and 25 percent year to date, with particularly strong growth achieved in France and Germany. • PrilosecTM sales in the US for the nine months were down 33 percent. In other markets, LosecTM sales declined 18 percent, although sales increased by 27 percent in Japan and by 22 percent in China. Cardiovascular Third Quarter CER % Nine Months CER % 2005 2004 2005 2004 SelokenTM / Toprol-XLTM 437 353 +23 1,280 1,006 +26AtacandTM 238 214 +9 727 639 +10PlendilTM 82 102 -22 287 361 -22ZestrilTM 83 105 -22 248 327 -27CrestorTM 325 260 +23 915 596 +51Total 1,327 1,208 +9 3,954 3,456 +11 • Sales of Toprol-XLTM in the US were up 31 percent for the quarter and 33 percent for the nine months, still running ahead of estimated underlying growth of 24 percent year to date as a result of destocking which occurred during 2004. • Sales of SelokenTM in other markets were up 3 percent in the third quarter and 7 percent for the nine months. • AtacandTM sales in the US were down 11 percent in the third quarter and down 5 percent for the nine months. Increased promotion following the launch of the heart failure indication has stabilised AtacandTM prescription market share in the US over the last several months. • In other markets, AtacandTM sales increased 18 percent in the third quarter and increased 16 percent year to date. • In the US, CrestorTM sales increased 17 percent in the third quarter to $189 million. CrestorTM share of new prescriptions in the US statin market was 6.8 percent in the week ending 14 October. Market share in the dynamic segment (new and switch patients) was 9.9 percent in the latest week. US sales for the nine months were up 52 percent. • In other markets, CrestorTM sales increased 34 percent in the third quarter and were up 48 percent year to date, with France and Italy contributing to a strong performance in Europe (up 51 percent year to date). Volume share of the statin market for CrestorTM is now 12.4 percent in Canada; 10.4 percent in the Netherlands; 11.7 percent in Italy; and 5.7 percent in France. • PlendilTM sales are down 22 percent in the quarter and year to date as a result of generic competition in the US market, where sales for the nine months are down 44 percent. Respiratory Third Quarter CER % Nine Months CER % 2005 2004 2005 2004 SymbicortTM 240 185 +28 742 578 +22PulmicortTM 234 211 +10 824 737 +10RhinocortTM 91 87 +4 295 268 +9AccolateTM 14 31 -55 55 84 -36OxisTM 23 25 -12 69 76 -14Total 636 574 +10 2,100 1,861 +10 • Sales of SymbicortTM increased 28 percent to $240 million in the third quarter. Sales for the nine months were up 22 percent. The regulatory file for the pMDI formulation of SymbicortTM for the treatment of asthma in the US was submitted on 23 September. A European Union mutual recognition variation procedure for a new asthma treatment concept, SymbicortTM Maintenance and Reliever Therapy, was initiated on 26 October. • Worldwide sales of PulmicortTM continue to be driven by the growth of PulmicortTM RespulesTM in the US, where sales were up 43 percent in the quarter and 34 percent for the nine months as a result of good underlying growth and some wholesaler stock movements between the two periods. • RhinocortTM sales year to date are up 9 percent, chiefly on sales of RhinocortTM Aqua in the US market (up 11 percent), which has been favourably impacted by price changes and managed care rebate adjustments. RhinocortTM Aqua prescriptions in the US are down 8 percent through nine months. Oncology Third Quarter CER % Nine Months CER % 2005 2004 2005 2004 CasodexTM 276 258 +7 840 736 +11ZoladexTM 258 236 +7 752 675 +7ArimidexTM 303 221 +36 856 578 +45IressaTM 61 113 -46 201 309 -36FaslodexTM 37 24 +50 101 73 +35NolvadexTM 26 30 -13 86 99 -15Total 963 885 +8 2,844 2,481 +12 • CasodexTM sales in the US were down 2 percent in the third quarter, broadly in line with the prescription trend. Sales for the nine months were up 6 percent on inventory movements and pricing. • CasodexTM sales in other markets were up 10 percent in the quarter and up 14 percent for the nine months. For the nine months, CasodexTM sales were up 10 percent in Europe and increased 18 percent in Japan. • In the US, sales of ArimidexTM were up 40 percent in the quarter and up 59 percent for the nine months. Growth in total prescriptions was 42 percent year to date. ArimidexTM share of total prescriptions for hormonal treatments for breast cancer in the US increased to 33.2 percent in September, up another 1.6 percentage points in the quarter and 6.3 percentage points higher since the beginning of the year. • ArimidexTM sales in other markets were up 34 percent in the third quarter and up 37 percent for the nine months, on strong year to date sales in Europe (up 36 percent) and Japan (up 31 percent). • Sales of IressaTM in the third quarter were $61 million, including $46 million of sales in Asia Pacific (up 7 percent in the quarter). For the nine months, sales in Asia Pacific were up 9 percent, as sales in China and other markets more than offset the 14 percent sales decline in Japan. • In the US, sales of IressaTM were $12 million in the third quarter, consistent with labelling which restricts usage to patients who have previously taken the product and are benefiting from its use. • Sales for FaslodexTM for the nine months reached $101 million (up 35 percent), chiefly on growth in Europe since marketing approval in March of last year. Sales in the US for the nine months were up 8 percent to $67 million. Neuroscience Third Quarter CER % Nine Months CER % 2005 2004 2005 2004 SeroquelTM 706 529 +32 2,006 1,465 +35ZomigTM 86 81 +5 258 267 -6Total 1,001 880 +13 2,975 2,558 +14 • In the US, SeroquelTM sales were up 30 percent in the third quarter and up 33 percent for the nine months, broadly in line with underlying sales growth. In September, SeroquelTM new prescription market share in the US increased to 29.7 percent, the only brand among the top three products to grow share this year. • In other markets, SeroquelTM sales were up 41 percent in the third quarter and 43 percent for the nine months, on a strong year to date performance in Europe (up 53 percent) and Canada (up 32 percent). • ZomigTM sales in the US were down 7 percent in the third quarter. Total prescriptions declined by 5 percent in the quarter. Year to date, sales were down 27 percent as a result of the low first quarter sales ahead of the transfer of distribution rights from Medpointe back to AstraZeneca on 1 April. • Sales of ZomigTM in other markets were up 11 percent in the third quarter and 9 percent year to date. Geographic Sales Third Quarter CER % Nine Months CER % 2005 2004 2005 2004 US 2,621 2,407 +9 7,864 6,974 +13Europe 2,012 1,858 +8 6,374 5,661 +8Japan 367 352 +6 1,103 1,018 +8RoW 789 648 +13 2,323 1,974 +11 • Sales in the US in the third quarter represent strong performances for the key growth products and Toprol-XLTM, which more than offset declines in sales of patent expired products and IressaTM. • The third quarter sales performance in Europe was led by the 5 key growers (up 27 percent), which more than offset an 18 percent decline in LosecTM. • Third quarter sales in Japan reflect continued strong growth for LosecTM (up 35 percent), CasodexTM (up 15 percent), ZoladexTM (up 11 percent) and ArimidexTM (up 24 percent). • Sales in China increased 25 percent to $61 million in the third quarter on good growth in LosecTM and the launch of IressaTM. Operating Review All narrative in this section refers to growth rates at constant exchange rates(CER) unless otherwise indicated Third Quarter Reported sales increased by 10 percent and operating profit by 45 percent. Atconstant exchange rates, sales increased by 9 percent and operating profit by 45percent. Following the successful introduction of Distribution ServiceAgreements in the US, reported Group and US sales reflect underlying demand.Wholesaler buying patterns in the prior year, however, continue to affect someindividual product performances. Currency had a 1 percent benefit to sales and was neutral to operating profit.In comparison to quarter three last year the dollar was slightly weaker againstthe euro, benefiting sales, and stronger against the Swedish krona (2 percent)and sterling (2 percent), decreasing costs. Overall, currency depressed EPS by1 cent as the beneficial exchange rate profile was offset by hedging benefitsfrom 2004 not being repeated during the quarter. Reported operating margin increased by 7.0 percentage points from 22.3 percentto 29.3 percent. Currency reduced margin by 0.3 percentage points and otherincome increased margin by 0.2 percentage points resulting in an underlyingmargin improvement of 7.1 percentage points for the quarter. Gross margin increased by 2.9 percentage points to 78.5 percent of sales.Currency depressed gross margin by 0.7 percentage points and payments to Merckwere level with prior year at 4.8 percent of sales. Included in the thirdquarter last year are ExantaTM inventory and asset provisions of $80 millionwhich depressed gross margin and, when excluded, implies a 1.9 percentage pointunderlying improvement for the quarter, due mostly to improved product mix andoperational efficiencies. In aggregate, R&D and SG&A expenses of $2,837 million increased 2 percent overlast year. In comparison to third quarter last year, R&D and SG&A combined added3.5 percentage points to operating margin. The sustained focus on productivity,combined with the lower level of late stage clinical trials compared with 2004,resulted in R&D expenditures decreasing by 4 percent for the quarter. SG&Aincreased by 4 percent for the quarter primarily due to increased investment inthe US on NexiumTM, CrestorTM and SeroquelTM over prior year. The fair value adjustments relating to financial instruments amounted to an $18million benefit in quarter three; $5 million benefit in cost of sales, $3million benefit to interest and $10 million benefit to R&D. Nine Months Reported sales increased by 13 percent and operating profit by 49 percent. Atconstant exchange rates, sales increased by 10 percent and operating profit by44 percent. Currency benefited reported sales by 3 percent and operating profit by 5percent. Cumulatively, exchange has benefited EPS by around 6 cents. We expectto see a 2 to 3 cents reduction in the year to date benefit during quarter fourbased on the current strengthening of the dollar and the hedging benefitsrealized in quarter four 2004 not being repeated. Operating margin increased by 6.5 percent from 21.0 percent to 27.5 percent.Underlying margin improvement was 7.0 percentage points for the nine months asthe currency benefit of 0.1 percentage points was offset by a reduction inmargin of 0.6 percent from other income, due principally to the gain on thedisposal of the Durascan business last year. Gross margin increased by 1.1 percentage points to 77.5 percent of sales. Lowerpayments to Merck (4.8 percent of sales) and currency each benefited grossmargin by 0.1 percentage points. Excluding prior year ExantaTM provisions andthe costs associated with the termination of the Medpointe ZomigTM distributionagreement in the first quarter of this year, underlying margin improved by 0.4percentage points. Benefits from ongoing productivity initiatives, together with a low point in theR&D and SG&A investment cycle, have resulted in a 2 percent decline (up 1percent as reported) in combined R&D and SG&A expense year to date. Incomparison to the first nine months last year, R&D and SG&A combined added 6.0percentage points to operating margin. The fair value adjustments relating to financial instruments amounted to a $61million charge for the nine months; $52 million charge in cost of sales, $4million charge to interest and $5 million charge to R&D. Interest and Dividend Income Net interest and dividend income for the third quarter was $48 million (2004 $28million) and for the nine months was $112 million (2004 $54 million). Theincrease over 2004 is primarily attributable to higher average investmentbalances and yields. The reported amount includes net income of $13 million inthe first nine months and $3 million in the third quarter arising from employerbenefit fund assets and liabilities as required by IAS 19. Taxation The effective tax rate for the third quarter was 29.4 percent (2004, rateexcluding non-recurring items 28.9 percent) and for the nine months was 29.8percent (2004, rate excluding non-recurring items 25.9 percent). The increaseover 2004 is due to a different geographical mix of profits and no relief inrespect of the LosecTM fine. Taxation in 2004 also benefited from a one-offreduction in the deferred tax liability in relation to rolled over gainsfollowing agreements with the relevant tax authorities. For the full year, therate is anticipated to be in the 29 to 30 percent range. Cash Flow Cash generated from operating activities was $4,814 million; $2,015 millionhigher than in the first nine months of 2004. This is as a result of a $1,590million increase in operating profits and a net $590 million cash improvement inworking capital, primarily due to lower inventory levels and higher creditorlevels. Cash outflows from investing activities of $621 million in the first nine monthscompare with $694 million outflows in the equivalent period in 2004. Capitalexpenditure fell by $247 million to $586 million. In the comparative period for2004, $308 million disposal proceeds were received in respect of disposals ofbusiness operations. Free cash flow (which represents net cash flows before financing activities, asadjusted for movements in short term deposits) for the period was $4,294million. After accounting for net share repurchases of $2,106 million, the$1,717 million dividend payment to shareholders and foreign exchange effects,there is a $362 million increase in cash and cash equivalents. Net funds at 30 September 2005 of $4,398 million were $433 million higher than31 December 2004. Share Repurchase Programme During the third quarter, 21.3 million shares were repurchased for cancellationat a total cost of $1 billion bringing the total repurchase for the first ninemonths of the year to 49.8 million shares at a total cost of $2,182 million.For the full year share repurchases are expected to exceed $3 billion. The total number of shares in issue at 30 September 2005 is 1,597 million. R&D Update Development of AZD2171, a Vascular Endothelial Growth Factor (VEGF) signallinginhibitor for the treatment of solid tumours, is being accelerated into a PhaseII/III clinical programme. In addition to the submission of a US NDA for SymbicortTM pMDI for the treatmentof asthma, an EU mutual recognition variation procedure for a new asthmaconcept, SymbicortTM Maintenance and Reliever Therapy was initiated on 26October. A US regulatory submission to support the use of SeroquelTM in bipolardepression will be made around the end of 2005 based on the results of twosuccessful pivotal studies (BOLDER I and II) in this indication. Regulatory submissions for CeroviveTM, a novel free-radical trappingneuroprotective agent for the acute treatment of ischaemic stroke, are nowscheduled for H1 2007 subject to the outcome of the CHANT and SAINT II studies.The CHANT study evaluating CeroviveTM in patients with haemorrhagic stroke isnow fully recruited and results will be available in Q1 2006. The development of the oral extended release formulation of AZD7009 formaintenance of sinus rhythm after conversion of atrial fibrillation has beenterminated. The intravenous programme targeted at conversion of patients fromatrial fibrillation to sinus rhythm remains in Phase II. The Phase II project evaluating AZD7371 for the treatment of overactive bladderhas also been terminated. A complete update of the AstraZeneca development pipeline will be provided as apart of the 2005 Annual Results presentation. Calendar 2 February 2006 Announcement of fourth quarter and full year 2005 results27 April 2006 Announcement of first quarter 2006 results27 April 2006 Annual General Meeting 200627 July 2006 Announcement of second quarter and half year 2006 results26 October 2006 Announcement of third quarter and nine months 2006 results Sir Tom McKillopChief Executive This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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