2nd Feb 2006 11:00
AstraZeneca PLC02 February 2006 AstraZeneca PLCFourth Quarter and Full Year Results 2005 "Strong growth from key products and improved efficiency drive 44 percentincrease in Earnings per Share for 2005." Financial Highlights Group 4th Quarter 4th Quarter Actual CER Full Year Full Year Actual CER 2005 2004 % % 2005 2004 % % $m $m $m $m Sales 6,286 5,799 +8 +9 23,950 21,426 +12 +10 Operating Profit 1,636 1,271 +29 +26 6,502 4,547 +43 +39 Profit before Tax 1,689 1,295 +30 +29 6,667 4,844 +38 +34 Earnings per Share: Before $0.77 $0.55 +38 +37 $2.91 $2.01* +44 +41 exceptional items Statutory $0.77 $0.55 +38 +37 $2.91 $2.18 +33 +30 * There were two exceptional items in Q3 2004, which benefited profit before taxby $219 million and earnings per share by $0.17. Excluding these benefits,earnings per share increased 44 percent on an as reported basis for the fullyear compared with 2004. All narrative in this section refers to growth rates at constant exchange rates(CER) unless otherwise indicated • Sales for the full year increased by 10 percent to $23,950 million.• Operating profit increased by 39 percent to $6,502 million as a result of the strong sales growth and the impact of ongoing productivity gains. Operating margin for the year increased to 27.2 percent.• AstraZeneca product portfolio now has 10 products with annual sales of $1 billion or greater.• Strong performance from five key products (NexiumTM, SeroquelTM, CrestorTM, ArimidexTM and SymbicortTM), with combined sales reaching $10,849 million, up 27 percent for the full year.• Supplemental New Drug Application submitted to US FDA in December for a new indication for SeroquelTM for the treatment of depressive episodes associated with bipolar disorder.• Development pipeline strengthened. Four new chemical entities have been entered into Phase III development.• Development pipeline augmented by three licensing transactions (one Phase III compound and two Phase II compounds) and the acquisition of KuDOS Pharmaceuticals announced in December.• Dividend increased by 38 percent to $1.30 for the full year.• Free cash flow of $6,052 million for the full year. Share repurchases totalled $3,001 million in 2005. Share repurchases in 2006 are expected to be at a similar level.• The Company anticipates EPS for 2006 in the range of $3.40 to $3.60. This includes around 45 cents of earnings related to Toprol-XLTM for the remaining eleven months of 2006. David Brennan, Chief Executive Officer, said: "Strong growth from our keyproducts and further improvements in efficiency have contributed toAstraZeneca's excellent financial performance. The output from our discoveryorganization has grown, and new medicines from both our own and externalresearch have entered late stage development, including those from recentlicensing transactions. However we will do more to further strengthen ourproduct pipeline, and this is my number one priority." London, 2 February 2006 Media Enquiries: Steve Brown/Edel McCaffrey (London) (020) 7304 5033/5034 Staffan Ternby (Sodertalje) (8) 553 26107 Rachel Bloom-Baglin (Wilmington) (302) 886 7858Analyst/Investor Enquiries: Mina Blair (London)/ Jonathan Hunt (London) (020) 7304 5084/ 5087 Staffan Ternby (Sodertalje) (8) 553 26107 Ed Seage/Jorgen Winroth (US) (302) 886 4065/(212) 579 0506 Photos of David Brennan, Chief Executive Officer, Jonathan Symonds, ChiefFinancial Officer, and Dr. John Patterson, Executive Director Development areavailable on www.newscast.co.uk Business Highlights All narrative in this section refers to growth rates atconstant exchange rates (CER) unless otherwise indicated Full Year Sales for the full year increased 10 percent at CER, or 12 percent on an asreported basis (including an exchange benefit of 2 percent) with good salesgrowth in all regions (US up 12 percent; Europe up 8 percent; Japan up 8percent; Rest of World up 15 percent). Combined expenditures in R&D and SG&A were up 2 percent at CER (3 percent asreported). Operating profit for the full year increased by 39 percent.Earnings per share for the year were $2.91 versus $2.18 in 2004, (which included$0.17 in exceptional benefits from a disposal gain and a tax credit). Excludingthese items from last year, earnings per share increased 41 percent. The Boardhas recommended an increase in the second interim dividend to $0.92, which willbring the dividend for the full year to $1.30, an increase of 38 percent. The AstraZeneca portfolio now has ten products with annual sales of greater than$1 billion. The combined sales of five key products (NexiumTM, SeroquelTM ,CrestorTM, ArimidexTM and SymbicortTM) grew by 27 percent to $10,849 million. NexiumTM sales were up 18 percent to $4,633 million. Sales in the US were up 15percent to $3,125 million, on continued strong volume growth partially offset bylower price realization. NexiumTM sales in other markets increased 25 percent. CrestorTM sales reached $1,268 million for the full year, up 38 percent. Salesin the US were up 34 percent. CrestorTM share of new prescriptions in the USstatin market was 6.9 percent in the week ending 20 January. Sales in othermarkets increased by 41 percent on good growth in France, Italy, and Canada. SymbicortTM sales increased 22 percent to $1,006 million. In November newclinical trial data were published (the COSMOS dose titration study) whichdemonstrate that the novel treatment concept-Symbicort Maintenance and RelieverTherapyTM-is more effective than fixed dose fluticasone/salmeterol. Theregulatory process seeking European Union approval for Symbicort Maintenance andReliever TherapyTM commenced in October 2005. ArimidexTM sales increased 44 percent to $1,181 million, on strong growth in theUS (up 59 percent) and in other markets (up 35 percent). ArimidexTM valuemarket share among hormonal treatments for breast cancer is now around 50percent, more than twice the share of its closest competitor. SeroquelTM sales reached $2,761 million (up 35 percent) including $2,003 millionin the US (up 33 percent). In the US, SeroquelTM share of new prescriptions inthe antipsychotic market increased to 29.8 percent in December, the only brandamong the top three products to grow market share in 2005. Sales in othermarkets increased by 40 percent. On 30 December the Company submitted asupplemental New Drug Application with the US FDA seeking approval for a newindication for SeroquelTM for the treatment of patients with depressive episodesassociated with bipolar disorder. If approved, it would be the only singleagent indicated to treat both the depressive and manic episodes associated withbipolar disorder. The Company continues to vigorously defend its intellectual property. InNovember the Company filed two lawsuits in the United States District Court forthe District of New Jersey. The first was against Teva Pharmaceuticals USA,Inc. and Teva Pharmaceuticals Industries, Ltd. for wilful infringement ofAstraZeneca's substance patent protecting SeroquelTM. The second lawsuit wasfiled against Ranbaxy Laboratories for wilful infringement of AstraZeneca'spatents protecting NexiumTM. On 17 January 2006 the Company received a decisionof Judge Rodney Sippel of the United States District Court for the EasternDistrict of Missouri that found that the patents asserted by AstraZeneca thatcover Toprol-XLTM were unenforceable based on the Company's inequitable conductin the prosecution of these patents in the US Patent and Trademark Office andinvalid. The Company disagrees with and is disappointed by these conclusions.The Company maintains that both patents are valid and enforceable and willappeal the Court's decision. Fourth Quarter Sales in the fourth quarter were $6,286 million, up 9 percent at CER, or 8percent on an as reported basis (including a 1 percent adverse impact fromcurrency movements). Sales increased 9 percent each in the US and in othermarkets. Sales for the five key growth products combined grew by 21 percent,led by SeroquelTM, NexiumTM, and ArimidexTM. Operating profit increased by 26 percent at CER in the fourth quarter (29percent as reported, including a 3 percent benefit from currency). Included inthe fourth quarter of this year were provisions of $105 million formanufacturing efficiencies, whilst the comparative period included $156 millionprovisions in respect of ExantaTM and IressaTM. Earnings per share in thefourth quarter were $0.77 compared with $0.55 in 2004. Future Prospects The Company is determined to further strengthen its product pipeline via asustained commitment to discovery and development of new medicines, from withinits own laboratories and from external partnerships. AstraZeneca is in a strongfinancial position from which to increase its investment in Research andDevelopment and utilize its strong cash generation to pursue attractive externalopportunities to augment the pipeline. Continued focus on improved productivityremains essential to release resources for these priorities. For 2006, the operating financial leverage stemming from good sales performanceand cost control, and the delivery of productivity gains seen in 2005 are set tocontinue. On this basis, the Company expects to deliver earnings per share inthe range of $3.40 to $3.60. Included in this target, for the remaining eleven months of the year, is around45 cents of earnings relating to Toprol-XLTM. This represents the maximumpotential impact to earnings from Toprol-XLTM should generic companies receivefinal regulatory approval and seek to launch "at risk" before the conclusion ofthe judicial appeals process. This potential impact excludes any one-time assetor inventory adjustments that may be required. 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 a generic competitor to Toprol-XLTM were introduced inthe US market prior to completion of Appellate Court process, the rate of growthin sales of generic omeprazole in the US, continued growth in currently marketedproducts (in particular CrestorTM, NexiumTM, SeroquelTM, SymbicortTM, ArimidexTMand CasodexTM), the growth in costs and expenses, interest rate movements,exchange rate fluctuations and the tax rate. For further details on these andother risks and uncertainties, see AstraZeneca PLC's Securities and ExchangeCommission filings, including the 2004 Annual Report on Form 20-F. Sales All narrative in this section refers to growth rates at constant exchange rates(CER) unless otherwise indicated. All sales numbers are quoted in $ million. Gastrointestinal Fourth Quarter CER % Full Year CER % 2005 2004 2005 2004 LosecTM/ PrilosecTM 411 446 -8 1,652 1,947 -17NexiumTM 1,247 1,106 +13 4,633 3,883 +18Total 1,677 1,576 +6 6,355 5,918 +5 • In the US, NexiumTM sales for the full year increased by 15 percent to $3,125 million. NexiumTM market share of total prescriptions in the US PPI market was 30.3 percent in December, up 3.4 percentage points versus December 2004. NexiumTM was the only branded PPI to gain market share in 2005. • In the fourth quarter, US sales for NexiumTM were up 8 percent, as continued strong growth in dispensed tablets (up 14 percent) was partially offset by lower realized prices resulting from performance-based contracts and Medicaid.• Sales of NexiumTM in other markets reached $1,508 million for the full year (up 25 percent) on a 2 point gain in market share. Sales in the fourth quarter were up 24 percent.• PrilosecTM sales in the US were down 28 percent for the full year. In other markets, LosecTM sales declined 15 percent, although sales increased by 25 percent in Japan and by 16 percent in China. Cardiovascular Fourth Quarter CER % Full Year CER % 2005 2004 2005 2004SelokenTM / Toprol-XLTM 455 381 +19 1,735 1,387 +24AtacandTM 247 240 +3 974 879 +8PlendilTM 73 94 -22 360 455 -23ZestrilTM 84 113 -26 332 440 -27CrestorTM 353 312 +12 1,268 908 +38Total 1,378 1,321 +4 5,332 4,777 +10 • Sales of Toprol-XLTM in the US increased by 32 percent for the full year, which was ahead of underlying growth of 23 percent as a result of the destocking which occurred in 2004. Fourth quarter sales in the US were up 29 percent. • On 17 January 2006 the Company announced it had received a decision of Judge Rodney Sippel of the US District Court for the Eastern District of Missouri that found that the patents asserted by AstraZeneca that cover Toprol-XLTM were invalid and unenforceable. The Company disagrees with and is disappointed by these conclusions. The Company maintains that both patents are valid and enforceable and will appeal the Court's decision.• Sales of SelokenTM in other markets declined 4 percent in the fourth quarter, but were up 4 percent for the full year.• AtacandTM sales in the US were down 8 percent for the full year, in line with the decline in total prescriptions. Increased promotion following the launch of the heart failure claim has stabilized AtacandTM prescription market share over the second half of 2005.• In other markets, AtacandTM sales were up 10 percent in the fourth quarter and were up 14 percent for the full year.• CrestorTM has now been approved in 75 markets and launched in 69. Since first launch in early 2003 nearly 6 million patients have been treated with CrestorTM and 40 million prescriptions have been written. CrestorTM sales for the full year reached $1,268 million, up 38 percent.• CrestorTM sales in the US increased by 34 percent to $730 million for the full year, but were up just 4 percent against a difficult comparison versus fourth quarter last year. CrestorTM share of new prescriptions in the US statin market was 6.9 percent in the week ending 20 January. Market share in the dynamic segment (new and switch patients) was 8.8 percent in the latest week.• In other markets, CrestorTM sales increased 27 percent in the fourth quarter. Sales for the full year were up 41 percent, on good growth in Europe (up 44 percent) and Canada (up 25 percent). Volume share of the statin market for CrestorTM is now 13.4 percent in Canada; 11.2 percent in the Netherlands; 11.7 percent in Italy; and 6.0 percent in France.• PlendilTM sales for the full year were down 23 percent as a result of generic competition in the US market, where sales declined by 49 percent. Respiratory Fourth Quarter CER % Full Year CER % 2005 2004 2005 2004SymbicortTM 264 219 +22 1,006 797 +22PulmicortTM 338 313 +8 1,162 1,050 +9RhinocortTM 92 93 -2 387 361 +6AccolateTM 17 32 -47 72 116 -39OxisTM 22 25 -12 91 101 -14Total 773 722 +7 2,873 2,583 +9 • SymbicortTM sales for the full year reached $1,006 million. Sales growth was 22 percent for both the fourth quarter and the full year, as market share continues to increase in the fast-growing combination product segment of the asthma and COPD markets.• The regulatory file for the pMDI formulation of SymbicortTM for the treatment of asthma in the US was submitted on 23 September.• In 2005 data from the STAY and COSMOS clinical trials were published. These studies are part of a large clinical trial programme, data from which consistently indicate that the novel treatment concept-Symbicort Maintenance and Reliever TherapyTM-prevents patients from developing potentially life-threatening asthma attacks better than fixed dose inhaled corticosteroids or combination therapy. An application seeking regulatory approval for this treatment concept in the European Union was submitted in October 2005.• Sales of PulmicortTM were up 9 percent for the full year, as the 18 percent growth in the US (fuelled by a 28 percent increase in PulmicortTM RespulesTM) more than offset a 2 percent decline in other markets.• RhinocortTM sales were up 6 percent for the full year, chiefly on sales of RhinocortTM Aqua in the US (up 7 percent), where price changes and managed care rebate adjustments more than offset the 10 percent decline in total prescriptions. Oncology Fourth Quarter CER % Full Year CER % 2005 2004 2005 2004CasodexTM 283 276 +5 1,123 1,012 +10ZoladexTM 252 242 +5 1,004 917 +7ArimidexTM 325 233 +40 1,181 811 +44IressaTM 72 80 -9 273 389 -31FaslodexTM 39 26 +50 140 99 +39NolvadexTM 28 35 -17 114 134 -16Total 1,001 895 +13 3,845 3,376 +12 • CasodexTM sales in the US were down 5 percent in the fourth quarter, but increased by 3 percent for the full year to $239 million. Total prescriptions were 3 percent lower than last year.• CasodexTM sales in other markets were up 7 percent in the fourth quarter and 11 percent for the full year, with Japan accounting for nearly half of this sales growth.• ArimidexTM sales increased 44 percent to $1,181 million for the full year. ArimidexTM value share of the market for hormonal treatments for breast cancer reached 50 percent in the latest month, a share more than twice that of its closest competitor. ArimidexTM is the leading aromatase inhibitor as a result of its well-established profile in primary adjuvant treatment for breast cancer, where the ATAC trial demonstrated its superiority over tamoxifen as initial adjuvant therapy. In December, data from a new meta-analysis of three international clinical trials demonstrated that switching patients from tamoxifen therapy to ArimidexTM results in an overall survival benefit versus remaining on tamoxifen treatment.• In the US, sales of ArimidexTM were up 58 percent in the fourth quarter and increased 59 percent for the full year. Total prescriptions increased by 40 percent versus last year, on a 7.1 percentage point increase in market share.• ArimidexTM sales in other markets increased by 31 percent in the fourth quarter. For the full year sales were up 35 percent on excellent growth in Europe (up 35 percent) and Japan (up 27 percent).• IressaTM sales were down 31 percent for the full year, chiefly as a result of the 63 percent decline in the US. IressaTM sales in Asia Pacific increased 7 percent for the full year, as sales in China and other markets more than offset a 15 percent sales decline in Japan.• Sales for FaslodexTM for the full year reached $140 million (up 39 percent) as a result of good growth in Europe since marketing approval in March 2004. Sales in the US were up 11 percent for the year.• ZoladexTM sales for the full year increased 7 percent to $1,004 million, as good sales growth in other markets (up 13 percent) more than offset a 23 percent decline in the US. Neuroscience Fourth Quarter CER % Full Year CER % 2005 2004 2005 2004SeroquelTM 755 562 +34 2,761 2,027 +35ZomigTM 94 89 +6 352 356 -3Total 1,084 938 +16 4,059 3,496 +15 • SeroquelTM sales reached $2,761 million for the full year (up 35 percent), including $2,003 million in the US. SeroquelTM value share of the global atypical antipsychotic market increased 2.7 percentage points in the twelve months ended 30 September 2005.• In the US, SeroquelTM sales were up 34 percent in the fourth quarter and increased 33 percent for the full year, ahead of prescription growth of 20 percent as a result of higher realized prices and favourable contract rebate adjustments. SeroquelTM share of new prescriptions in the US antipsychotic market increased to 29.8 percent in December 2005, up 2.2 percentage points over last year.• In other markets, SeroquelTM sales were up 35 percent in the fourth quarter. Sales for the full year increased by 40 percent on strong growth in Europe (up 48 percent), Asia Pacific (up 22 percent) and Canada (up 29 percent).• In October 2005 top-line results were released from the BOLDER II study, reinforcing the findings from the landmark BOLDER I study which demonstrate that monotherapy with SeroquelTM results in statistically significant reductions in levels of bipolar depression compared with placebo. On 30 December a supplemental New Drug Application was submitted to the US FDA seeking approval for SeroquelTM for the treatment of patients with depressive episodes associated with bipolar disorder. If approved, SeroquelTM would be the only single agent indicated to treat both the depressive and manic episodes associated with bipolar disorder.• ZomigTM sales for the full year declined by 3 percent, as growth in other markets (up 8 percent) was more than offset by an 18 percent decline in the US.• DiprivanTM sales in other markets were down 8 percent for the full year. US sales declined 44 percent, chiefly on lower prices as a result of the introduction of another generic product. Geographic Sales Fourth Quarter CER % Full Year CER % 2005 2004 2005 2004US 2,907 2,657 +9 10,771 9,631 +12Europe 2,089 1,988 +7 8,463 7,649 +8Japan 424 412 +8 1,527 1,430 +8RoW 866 742 +10 3,189 2,716 +11 • In the US sales were up 12 percent for the full year. Sales growth for NexiumTM, SeroquelTM, Toprol-XLTM, ArimidexTM and CrestorTM more than offset the declines in PrilosecTM, PlendilTM, and IressaTM.• Sales in Europe increased by 8 percent for the full year, with good volume growth partially offset by lower realized prices. Sales for the five key products combined grew by 30 percent, which more than compensated for a 24 percent decline in LosecTM.• Sales in Japan were up 8 percent for the full year as a result of good growth for LosecTM, CasodexTM, ZoladexTM and ArimidexTM.• Sales in China were up 33 percent to $272 million for the full year on good growth in cardiovascular products and 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 Fourth Quarter Reported sales increased by 8 percent and operating profit by 29 percent. Atconstant exchange rates, sales increased by 9 percent and operating profit by 26percent. Reported US sales growth in the fourth quarter of 9 percent compares tounderlying growth of 8 percent after adjusting for a slight increase ininventory levels in the quarter and the phasing of managed care accruals in theprior year. Individual product level performances continue to be affected as aresult of prior year buying patterns. Currency movements in the quarter adversely affected sales by 1 percent andbenefited operating profit by 3 percent. Overall, currency movements in thequarter benefited EPS by 2 cents. Currency movements in the quarter compared toquarter four last year were stronger than anticipated with the euro 9 percentweaker than the dollar, decreasing sales, while the Swedish krona and sterlingwere 15 percent and 6 percent weaker respectively, decreasing costs. Thisprofile yielded a net positive currency impact compared to the negative impactanticipated at quarter three. Reported operating margin increased by 4.0 percentage points from 22.0 percentto 26.0 percent. Currency benefited margin by 0.7 percentage points implying anunderlying margin improvement of 3.3 percentage points for the quarter. Gross margin increased by 3.7 percentage points to 77.9 percent of sales. The0.1 percent benefit to gross margin due to lower payments to Merck at 4.9percent of sales was offset by currency. Included in quarter four this year wereprovisions of around $100 million for manufacturing efficiencies, however theprior year included the ExantaTM and IressaTM provisions totalling $156 million.Taken together this implies an underlying margin increase of 2.7 percentagepoints due mostly to favourable product mix and continued operationalefficiencies. In aggregate, R&D and SG&A expenses of $3,276 million increased 11 percent overlast year. In comparison to quarter four last year, combined R&D and SG&Areduced operating margin by 0.9 percentage points. Reported R&D expenditureswere down 3 percent on an as reported basis, but up 1 percent over last year inconstant currency terms. SG&A increased by 15 percent over last year largely asthe result of increased product investment in the US and Rest of World markets,together with investments in a Medicare Outreach programme to boost patientawareness. The fair value adjustments relating to financial instruments amounted to a $38million benefit in quarter four; $20 million benefit in cost of sales, $22million benefit to R&D and $4 million charge to interest. Full Year Reported sales increased by 12 percent and operating profit by 43 percent. Atconstant exchange rates, sales increased by 10 percent and operating profit by39 percent. Overall, exchange benefited EPS by around 8 cents. US sales increased by 12 percent with inventory movements neutral across theyear following the successful introduction of Distribution Service Agreements.Adjustments to managed care accruals at the half year benefited annual US salesgrowth by 2 percent resulting in an underlying demand growth of 10 percent forthe year. Operating margin increased by 6.0 percent from 21.2 percent to 27.2 percent.Currency benefited margin by 0.4 percentage points resulting in an underlyingmargin improvement of 5.6 percentage points for the year. Gross margin increased by 1.8 percentage points to 77.6 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 and IressaTMprovisions totalling $236 million, the costs associated with the termination ofthe Medpointe ZomigTM distribution agreement in the first quarter of this year,and the manufacturing efficiency provisions charged in the fourth quarter of2005, underlying margin improved by 1.2 percentage points. R&D and SG&A combined grew by 2 percent (3 percent as reported) with R&Ddeclining by 4 percent and SG&A growing by 4 percent. The combined effect ofthese movements added 4.1 percentage points to operating margin for the fullyear. Excluding the LosecTM European Commission fine and the investments madeon the Medicare Outreach programme in the fourth quarter of this year SG&Agrowth was around 2 percent. Lower other income reduced margin by 0.3 percentage points due principally tothe gain on the disposal of the Durascan business in the prior year. The fair value adjustments relating to financial instruments amounted to a $23million charge for the full year; $32 million charge in cost of sales, $17million benefit to R&D and $8 million charge to interest. Interest and Dividend Income Net interest and dividend income for the fourth quarter was $53 million (2004$24 million) and for the full year was $165 million (2004 $78 million). Theincrease over 2004 is primarily attributable to higher average investmentbalances and yields. The reported amount includes net income of $15 million inthe full year and $2 million in the fourth quarter arising from employee benefitfund assets and liabilities as required by IAS 19. Taxation The effective tax rate for the fourth quarter was 27.4 percent (2004 rateexcluding exceptional items 28.3 percent) and for the twelve months was 29.1percent (2004 rate excluding exceptional items 26.6 percent). The charge for theyear increases mainly due to the movements in provisions relating to foreign taxcredits and transfer pricing. The increase over 2004 also reflects the releaseof provisions following a settlement of prior year issues in 2004, and no reliefin respect 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. Cash Flow Cash generated from operating activities was $6,743 million compared with $4,817million in 2004. This increase is principally a result of a $1,955 millionincrease in operating profits and the effects of a net $399 million cash inflowfrom favourable movements in working capital, particularly with inventory,offset by a $360 million increase in tax paid. Free cash flow (which represents net cash flows before financing activities, asadjusted for movements in short term deposits) for the year was $6,052 millioncompared with $3,932 million in 2004. After accounting for net sharerepurchases of $2,858 million, the $1,717 million dividend payment toshareholders and foreign exchange effects, there is a $968 million increase incash and cash equivalents. Cash outflows from investing activities of $1,182 million in the year comparedwith $970 million inflows in 2004. The inflows in 2004 were mainly a result ofa change in investment strategy that led to the bulk of group cash beingtransferred to more liquid funds and which require classification as cashequivalents under IFRS, rather than short-term investments. Capital expenditure fell by $253 million to $810 million and expenditure onnon-current asset investments was $105 million lower in 2005 as a result of the$110 million investment in Cambridge Antibody Technology made in the fourthquarter 2004. In 2004, the disposal proceeds of $355 million were principally inrespect of the disposal of Advanta. Net funds at 31 December 2005 of $5,402 million were $1,406 million higher thanat 31 December 2004. Investments New collaboration agreements signed during 2005 with Avanir and Astex createdintangible assets worth $20 million. Further payments were made in respect ofexisting licensed in products amounting to $44 million. In December, new collaboration agreements with Protherics PLC, Targacept Inc andAtherogenics Inc. were announced and are recorded as post balance sheet events.We will invest $41 million in the global development and commercialisationagreement with Protherics, being a 4.3% investment in equity and an intangibleasset. The licensing and commercialisation agreement with Atherogenics Inc.will initially require a $50 million payment by AstraZeneca and the licensingand research collaboration agreement with Targacept Inc. will initially requirea $10 million payment by AstraZeneca. Both of these payments will be recordedas intangible assets. We have also entered into an agreement to acquire the total share capital ofKuDOS Pharmaceuticals Limited for $210 million, subject to cash and workingcapital adjustment. Most of the cost of the investment reflects an intangiblerepresenting the oncology technology platform of KuDOS. Our recent focus on licensing in opportunities with third parties will result inadditional intangible asset investment in the balance sheet. Should any ofthese products fail in development, the associated intangibles will need to bewritten off. Dividends and Shareholder Return The Board has recommended a 43 percent increase in the second interim dividendto $0.92 (51.8 pence, 7.02 SEK) to be paid on 20 March 2006. This brings thefull year dividend to $1.30 (73.7 pence, 10.01 SEK) an increase of 38 percent. In line with the policy stated last year the Board intends to continue itspractice of growing dividends in line with earnings (maintaining dividend coverin the two to three times range) whilst substantially distributing the balanceof cash flow via share repurchases. In 2005 $4.7 billion was distributed fromfree cash flow of $6.1 billion via dividends and share repurchases. The Boardintends to continue this policy, but firmly believes that the first call on freecash flow is business need and, having fulfilled that, will return surplus cashflow to shareholders. The primary business need is to build the researchpipeline by supporting internal and external opportunities. On this basis theBoard intends to repurchase shares at around the same level as 2005. Share Repurchase Programme During the fourth quarter, 17.9 million shares were repurchased for cancellationat a total cost of $819 million bringing the total repurchase for the full yearto 67.7 million shares at a total cost of $3,001 million. The total number of shares in issue at 31 December 2005 is 1,581 million. Based on an estimate of interest income foregone, the share buy back programmeis calculated to have added 8 cents to EPS. Updated R&D Pipeline Table The US submission for the pMDI formulation of SymbicortTM for the fixed dosetreatment of asthma in adults and adolescents was filed on 23rd September andthe FDA review is ongoing as are US Phase III COPD studies. In Europe, wherethe Turbuhaler version of SymbicortTM has been registered for a number of yearsin asthma and COPD as a maintenance therapy, our enlarged submission package foruse as Maintenance and Reliever Therapy (SMART) was filed on schedule in thethird quarter and is now going through mutual recognition with Sweden as thereference member state. The European development programme for the pMDI versionof SymbicortTM is being expanded to include data on two extra strengths of theproduct. This will allow easier switching between the existing TurbuhalerTM andthe new pMDI device. Data will be ready to supplement the registration packagein 2008. New data on CrestorTM will be presented in the first half of 2006, including thetop line results of the ASTEROID study, looking at the effect of CrestorTM onthe regression of coronary artery atheroma. The results of recently completedpharmacoepidemiology studies will also be presented during this time period. The European and US submissions for the Sustained Release formulation ofSeroquelTM for the treatment of schizophrenia is now scheduled for Q3 2006.SeroquelTM is now in Phase III development for Generalised Anxiety Disorder(GAD) and Major Depressive Disorder (MDD) using the Sustained Releaseformulation. ExantaTM was submitted to the European regulatory authorities in December 2005under the new centralised procedure for the indication of prevention of strokein atrial fibrillation. In the US, the company continues discussions with theFDA, but the current assessment is that it is unlikely a way forward for ExantaTM registration in the US will be identified. ZactimaTM, a VEGF/EGF TKI inhibitor for the treatment of NSCLC and medullarythyroid cancer, has been granted fast track and orphan status by the FDA for thethyroid indication. In January 2006, the EU COMP (Committee for OrphanMedicinal Products) positive opinion of December 2005 regarding orphan drugstatus for ZactimaTM in the treatment of medullary thyroid cancer, was adopted. The submission target dates for GalidaTM, a PPAR agonist for diabetes/metabolicsyndrome, currently 2H 2007 for the US and Europe, are subject to the results ofPhase III studies currently ongoing and regulatory discussions. AZD6140, an ADP receptor antagonist being developed in the area of arterialthrombosis, has progressed to Phase III for the treatment of acute coronarysyndrome. Phase II data on AZD0837 has confirmed that it could be differentiated fromExantaTM with regard to the liver signal but also showed a short half-life,which precludes once daily dosing. It has been decided to develop this productthrough an extended release formulation, and whilst early data shows that such aformulation is feasible, AZD0837 will not enter Phase III development for launchuntil data on the definitive formulation has been generated which could take upto two years. In December 2005 rights to a late Phase III compound (AGI-1067) for thetreatment of atherosclerosis were obtained from Atherogenics Inc. Two compoundsin Phase II development were also acquired: TC-1734, a product for the treatmentof Alzheimer's disease from Targacept Inc, and CytofabTM, Protherics's compoundin development for the treatment of severe sepsis. Our oncology discovery capability and early pipeline has been furtherstrengthened by the acquisition of KuDOS Pharmaceuticals. An updated R&D pipeline table is appended to this press release and is alsoavailable on the Company's website, www.astrazeneca.com under information forinvestors. Calendar14 March 2006 Education seminar on Merck payments27 April 2006 Announcement of first quarter 2006 results27 April 2006 Annual General Meeting 20068 June 2006 Business Review meeting (London)27 July 2006 Announcement of second quarter and half year 2006 results26 October 2006 Announcement of third quarter and nine months 2006 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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