2nd Feb 2006 11:00
AstraZeneca PLC02 February 2006 Consolidated Income Statement As restatedFor the year ended 31 December 2005 2004 $m $m Sales 23,950 21,426 Cost of sales (5,356) (5,193) Distribution costs (211) (177) Research and development (3,379) (3,467) Selling, general and administrative expenses (8,695) (8,268) Other operating income 193 226 Operating profit 6,502 4,547 Profit on sale of interest in joint venture - 219 Finance income 665 532 Finance expense (500) (454) Profit before tax 6,667 4,844 Taxation (1,943) (1,161) Profit for the period 4,724 3,683 Attributable to: Equity holders of the Company 4,706 3,664 Minority interests 18 19 4,724 3,683 Basic earnings before exceptional items per $0.25 Ordinary Share $2.91 $2.01 Basic earnings after exceptional items per $0.25 Ordinary Share $2.91 $2.18 Diluted earnings after exceptional items per $0.25 Ordinary Share $2.91 $2.18 Weighted average number of Ordinary Shares in issue (millions) 1,617 1,673 Diluted average number of Ordinary Shares in issue (millions) 1,618 1,675 Exceptional items in 2004 comprised profit on sale of interest in joint venture($219 million) and exceptional tax credits ($67 million). Consolidated Income Statement As restatedFor the quarter ended 31 December 2005 2004 $m $m Sales 6,286 5,799 Cost of sales (1,388) (1,498) Distribution costs (56) (45) Research and development (873) (899) Selling, general and administrative expenses (2,403) (2,138) Other operating income 70 52 Operating profit 1,636 1,271 Finance income 181 136 Finance expense (128) (112) Profit before tax 1,689 1,295 Taxation (462) (366) Profit for the period 1,227 929 Attributable to: Equity holders of the Company 1,224 923 Minority interests 3 6 1,227 929 Basic earnings before exceptional items per $0.25 Ordinary Share $0.77 $0.55 Basic earnings after exceptional items per $0.25 Ordinary Share $0.77 $0.55 Diluted earnings after exceptional items per $0.25 Ordinary Share $0.77 $0.55 Weighted average number of Ordinary Shares in issue (millions) 1,590 1,654 Diluted average number of Ordinary Shares in issue (millions) 1,592 1,656 Consolidated Balance Sheet As restatedAs at 31 December 2005 2004 $m $m ASSETS Non-current assets Property, plant and equipment 6,985 8,097Intangible assets 2,712 3,050Other investments 256 262Deferred tax assets 1,117 1,218 11,070 12,627 Current assets Inventories 2,206 3,020Trade and other receivables 4,961 4,740Other investments 1,624 1,198Cash and cash equivalents 4,979 4,067 13,770 13,025Total assets 24,840 25,652 LIABILITIESCurrent liabilities Interest bearing loans and borrowings (90) (142)Other payables (6,749) (6,445) (6,839) (6,587)Non-current liabilities Interest bearing loans and borrowings (1,111) (1,127)Deferred tax liabilities (1,112) (1,328)Retirement benefit obligations (1,706) (1,761)Provisions (309) (266) Other payables (72) (86) (4,310) (4,568)Total liabilities (11,149) (11,155)Net assets 13,691 14,497 EQUITY Capital and reserves attributable to equity holders Share capital 395 411 Share premium account 692 550 Other reserves 1,831 1,853 Retained earnings 10,679 11,590 13,597 14,404 Minority equity interests 94 93 Total equity and reserves 13,691 14,497 Consolidated Cash Flow Statement As restatedFor the year ended 31 December 2005 2004 $m $mCash flows from operating activities Operating profit before taxation 6,502 4,547Depreciation and amortisation 1,327 1,268Decrease/(increase) in working capital 332 (67)Other non-cash movements 220 384Cash generated from operations 8,381 6,132 Interest paid (32) (69) Tax paid (1,606) (1,246) Net cash inflow from operating activities 6,743 4,817 Cash flows from investing activities Disposal of business operations - 355Movement in short term investments and fixed deposits (491) 1,855Purchases of property, plant and equipment (810) (1,063)Disposals of property, plant and equipment 87 35Purchase of intangible assets (157) (215)Purchase of non-current asset investments (12) (117)Interest received 206 119Dividends paid by subsidiaries to minority interests (5) (5)Dividends received - 6Net cash (outflow)/inflow from investing activities (1,182) 970Net cash inflow before financing activities 5,561 5,787Cash flows from financing activities Proceeds from issue of share capital 143 102Repurchase of shares (3,001) (2,212)Increase in loans - 725Dividends paid (1,717) (1,378)Movement in short term borrowings 3 2Net cash outflow from financing activities (4,572) (2,761)Net increase in cash and cash equivalents in the period 989 3,026 Cash and cash equivalents at beginning of the period 3,927 872Exchange rate effects (21) 29Cash and cash equivalents at the end of the period 4,895 3,927Cash and cash equivalents consists of:Cash and cash equivalents 4,979 4,067Overdrafts (84) (140) 4,895 3,927 Consolidated Statement of Recognised Income and Expense As restatedFor the year ended 31 December 2005 2004 $m $m Profit for the period 4,724 3,683 Foreign exchange adjustments on consolidation (1,052) 744 Available for sale (losses)/gains taken to equity, net of tax (10) 31 Actuarial loss for the period (35) (179) Tax on items taken directly to reserves (25) 416 Total recognised income and expense for the period 3,602 4,695 Attributable to: Equity holders of the Company 3,595 4,690 Minority interests 7 5 Notes to the Preliminary Announcement 1 BASIS OF PREPARATION AND ACCOUNTING POLICIES The preliminary announcement for the full year ended 31 December 2005 has beenprepared in accordance with International Accounting Standards and InternationalFinancial Reporting Standards (collectively "IFRS") as adopted by the EuropeanUnion (EU) at 31 December 2005. Details of the accounting policies applied areset out in the IFRS Restatement information in AstraZeneca PLC's Annual Reportand Form 20-F Information 2004, except that, in the period under review, theamendment to IAS 39 'Financial Instruments: Recognition and Measurement - TheFair Value Option' has been adopted. As a result, the accounting for long termloans has been changed; such loans are now categorised as fair value throughprofit and loss with changes in value recognised in the income statement.Previously these loans had been recognised at cost except where hedge accountinghad been applied. The comparative information has been restated accordingly.The effect of adoption on comparative results was not significant: net assets at31 December 2004 were reduced by $21m. The annual financial informationpresented in this preliminary announcement for the year ended 31 December 2005is extracted from, and is consistent with, that in the Group's audited financialstatements for the year ended 31 December 2005, and those financial statementswill be delivered to the Registrar of Companies following the Company's AnnualGeneral Meeting. The information contained in Note 3 updates the disclosures concerning legalproceedings and contingent liabilities in the Company's Annual Report and Form20-F Information 2004 and the Third Quarter and Nine Months Results 2005. Information in this preliminary announcement does not constitute statutoryaccounts of the Group within the meaning of Section 240 of the Companies Act1985. Statutory accounts for the year ended 31 December 2004, which wereprepared under accounting practices generally accepted in the UK, have beenfiled with the Registrar of Companies. The auditors' report on those accountswas unqualified and did not contain any statement under Section 237 of theCompanies Act 1985. 2 NET FUNDS The table below provides an analysis of net funds and a reconciliation of netcash flow to the movement in net funds. As restated 1 Jan Cash Other Exchange At 31 Dec 2005 flow non-cash movements 2005 $m $m $m $m $m Loans due after 1 year (1,127) - 16 - (1,111) Total loans (1,127) - 16 - (1,111)Other investments - current 1,198 491 (63) (2) 1,624Cash and cash equivalents 4,067 935 - (23) 4,979Overdrafts (140) 54 - 2 (84)Short term borrowings (2) (3) - (1) (6) 5,123 1,477 (63) (24) 6,513Net funds 3,996 1,477 (47) (24) 5,402 Other non-cash movements in the period consist of fair value adjustments underIAS 39. 3 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 andthe validity of certain patents. The matters discussed below constitute themore significant developments since publication of the disclosures concerninglegal proceedings in the Company's Annual Report and Form 20-F Information 2004and the Third Quarter and Nine Months Results 2005. Matters disclosed in respect of the fourth quarter of 2005 and January 2006 DiprivanTM (propofol) In respect of the notification received from Amphastar Pharmaceuticals, Inc. inSeptember 2005 under section 505(b)(2) of the US Food, Drug, and Cosmetic Act,AstraZeneca did not file a patent infringement complaint against Amphastar. LosecTM/PrilosecTM (omeprazole) In January 2006, AstraZeneca Canada Inc. was served with a claim in the FederalCourt of Canada for payment of an undetermined sum based on damages allegedlysuffered by Apotex, due to the delay from January 2002 to January 2004 in theissuance to Apotex of a notice of compliance (marketing approval) in Canada forits 20mg omeprazole capsule product. AstraZeneca believes the claim is withoutmerit and intends to defend it and to pursue its already pending patentinfringement action against Apotex vigorously. NexiumTM (esomeprazole magnesium) As previously disclosed, in November 2005 AstraZeneca commenced patentinfringement litigation in the US District Court for the District of New Jerseyagainst Ranbaxy Pharmaceuticals, Inc. and its affiliates in response toRanbaxy's paragraph IV certifications regarding NexiumTM, received in October2005. In January 2006, AstraZeneca received a notice from IVAX Pharmaceuticals Inc.that IVAX Corporation had submitted an Abbreviated New Drug Application to theUS FDA for esomeprazole magnesium delayed-release capsules, 20mg and 40mg. TheANDA contained paragraph IV certifications of invalidity and/or non-infringementin respect of certain AstraZeneca US patents listed in the FDA's Orange Bookwith reference to NexiumTM, the latter of which expires in 2019. IVAX alsocertified in respect of certain other AstraZeneca US patents listed in theOrange Book with reference to NexiumTM that IVAX will not launch its productprior to the expiry of those patents, the latter of which expires in October2007. AstraZeneca has 45 days within which to commence a patent infringementlawsuit against IVAX that would automatically stay, or bar, the FDA fromapproving IVAX's ANDA for 30 months (or until an adverse court decision,whichever occurs earlier). AstraZeneca is evaluating IVAX's notice andcontinues to have full confidence in its intellectual property protecting NexiumTM. SeroquelTM (quetiapine fumarate) As previously disclosed, in November 2005 in response to Teva's Abbreviated NewDrug Application and Teva's intent to market a generic version of SeroquelTM inthe US prior to the expiration of AstraZeneca's patent, AstraZeneca filed alawsuit against Teva in the US District Court for the District of New Jersey forwilful patent infringement. AstraZeneca has now been served in the US with a total of approximately 60lawsuits in which plaintiffs contend that they developed diabetes or otherallegedly related injuries as a result of taking SeroquelTM and/or atypicalantipsychotics made by other pharmaceutical companies. The Company has alsobeen made aware that a putative nationwide class action complaint was recentlyfiled in federal court in the Southern District of Illinois. The complaint isvery similar in form and content to the complaint filed in the US District Courtfor the Middle District of Florida in 2003 (Susan Zehel-Miller et al. v.AstraZenaca (sic), AstraZenaca Pharmaceuticals LP, (sic), described in theCompany's Annual Report and Form 20-F Information 2004) that soughtcertification of a nationwide class of SeroquelTM users and others, includingindividuals who were alleged to have developed diabetes as a result of usingSeroquelTM. The federal court in Florida denied certification of the class inthe Zehel-Miller case. In early 2005, after the plaintiffs' efforts in thatcase to secure appellate relief failed, the plaintiffs agreed to a voluntarydismissal of all of their claims with prejudice. AstraZeneca has been informedthat more than 100 additional complaints involving SeroquelTM have just beenfiled in various courts in the US, but these have not been served. It ispossible that plaintiffs' lawyers are contemplating the filing of potentiallynumerous additional lawsuits against AstraZeneca and other manufacturers ofatypical anti-psychotics involving allegations concerning diabetes. AstraZeneca intends to defend vigorously all of the pending cases relating toSeroquelTM. Toprol-XLTM (metoprolol succinate) In the patent litigation continuing in the US against KV Pharmaceutical Company,Andrx Pharmaceuticals LLC and Eon Labs Manufacturing Inc. relating to thosecompanies' notifications of their intentions to market generic versions ofToprol-XLTM tablets prior to the expiration of AstraZeneca's relevant patents,summary judgement motions were filed by the defendants and AstraZeneca onvalidity, enforceability and infringement in 2005. Oral argument on all of thepending summary judgement motions was heard in November 2005. As previouslydisclosed, in January 2006 the US District Court for the Eastern District ofMissouri issued a ruling on the summary judgement motions. The court found thatthe two patents-in-suit are unenforceable based on the Company's inequitableconduct in the prosecution of these patents in the US Patent and TrademarkOffice and invalid. The Company disagrees with and is disappointed by theseconclusions. AstraZeneca will appeal this decision. None of the AbbreviatedNew Drug Applications filed by KV, Andrx or Eon has received tentative approvalfrom the US Food and Drug Administration. Under the ANDA statute, the January2006 adverse decision concerning the validity and enforceability of theAstraZeneca patents-in-suit automatically removes any stay on the FDA'sauthority to grant final approval of the ANDAs. In January 2006, AstraZeneca was served with a complaint filed in the USDistrict Court for the District of Delaware entitled Meijer, Inc. and MeijerDistribution, Inc. v. AstraZeneca Pharmaceuticals LP, AstraZeneca LP,AstraZeneca AB and Aktiebolaget Hassle. The complaint is a putative classaction that alleges that the AstraZeneca defendants attempted to illegallymaintain monopoly power in the US over Toprol-XLTM in violation of the ShermanAct through the listing of invalid and unenforceable patents in the FDA's OrangeBook and the enforcement of such patents through litigation against genericmanufacturers seeking to market metoprolol succinate. The complaint seekstreble damages based on alleged overcharges to the putative class of plaintiffs. The lawsuit is based upon the finding described above by the US District Courtfor the Eastern District of Missouri in the consolidated litigation against KV,Andrx and Eon that the AstraZeneca patents relating to Toprol-XLTM are invalidand unenforceable. As noted above, AstraZeneca is appealing this ruling in thepatent litigation. AstraZeneca denies the allegations of this anti-trustcomplaint and will vigorously defend the lawsuit. AstraZeneca continues to maintain that its patents for Toprol-XLTM are valid,enforceable and infringed by the proposed generic products of KV, Andrx and Eonand that its enforcement of its patents did not violate anti-trust laws. Average wholesale price class action litigation Since the original class action suit in Massachusetts naming AstraZeneca as adefendant along with other pharmaceutical manufacturers, AstraZeneca and othermanufacturers have been sued in similar lawsuits filed by the state AttorneysGeneral of Pennsylvania, Nevada, Montana, Wisconsin, Illinois, Alabama,Kentucky, Arizona and Mississippi, as well as by multiple individual counties inthe State of New York. The Attorney General lawsuits seek to recover allegedoverpayments under Medicaid and other state-funded healthcare programmes. Since the decision on class certification issued by the District Court in Bostonin August 2005 and previously disclosed in the Third Quarter and Nine MonthsResults 2005, as to the proposed classes involving physician-administered drugs,the court has certified a nationwide class of Part B beneficiaries againstAstraZeneca and three other manufacturers. The additional proposed classesinvolving physician-administered drugs, third-party payers who reimbursed forphysician-administered drugs or who covered Part B co-payments have beencertified only as Massachusetts state, as opposed to nationwide, classes. Forall classes, the only AstraZeneca drug at issue is ZoladexTM (goserelin acetateimplant). There is a possibility that the decision on class certification will beappealed. Following a decision on the appeal, the court will set a schedule forsummary judgement proceedings and trial. In the interim, Attorney General casesare proceeding independently of the consolidated action in Pennsylvania,Alabama, Mississippi, Arizona and Wisconsin. AstraZeneca denies the allegations made in all the average wholesale pricelawsuits and will vigorously defend the actions. Avorelin The legal proceedings with Mediolanum farmaceutici S.p.A. in respect of thelicence agreement for avorelin have now been settled by the parties on termssatisfactory to AstraZeneca (which admits no liability). Matters previously disclosed in respect of the third quarter of 2005 DiprivanTM (propofol) In September 2005, AstraZeneca received notification from AmphastarPharmaceuticals, Inc. under section 505(b)(2) of the US Food, Drug, and CosmeticAct that it intends to manufacture and sell propofol in the US prior to theexpiration of certain of AstraZeneca's propofol-related patents. Amphastarcontends that these patents would not be infringed by such manufacture and sale. AstraZeneca is evaluating Amphastar's notification and continues to have fullconfidence in its intellectual property protecting DiprivanTM. LosecTM (omeprazole) As previously disclosed, in June 2005 the European Commission notifiedAstraZeneca PLC and AstraZeneca AB of its Decision to impose fines totaling €60million on the companies for infringements of European competition law (Article82 of the EC Treaty and Article 54 of the EEA Agreement). The fine was fullyprovided for in the half year results through a charge to operating profit of$75 million. AstraZeneca does not accept the Commission's Decision and hasappealed it to the Court of First Instance. AstraZeneca denies that it had adominant position or that it engaged in the behaviours as characterised by theCommission. It is alleged by the Commission that these activities had theeffect of hindering the entry of the generic version of LosecTM and of paralleltrade. It is possible that third parties could seek damages for alleged lossesarising from this. Any such claims would be vigorously resisted. NexiumTM (esomeprazole magnesium) In October 2005, AstraZeneca received a notice from Ranbaxy Pharmaceuticals Inc.that Ranbaxy Laboratories Limited has submitted an Abbreviated New DrugApplication to the US Food and Drug Administration for esomeprazole magnesiumdelayed-release capsules, 20mg and 40mg, containing paragraph IV certificationsof invalidity and/or non-infringement with respect to certain AstraZeneca USpatents listed in the FDA's Orange Book in reference to NexiumTM, the latter ofwhich expires in 2019. The 45 day time period within which AstraZeneca can commence a patentinfringement lawsuit against Ranbaxy that would automatically stay, or bar, theFDA from approving Ranbaxy's ANDA for 30 months (or until an adverse courtdecision, whichever occurs earlier) has not yet expired. Ranbaxy has also certified with respect to certain other AstraZeneca US patentslisted in the Orange Book in reference to NexiumTM that Ranbaxy will not launchits product prior to the expiry of those patents, the latter of which expires inOctober 2007. AstraZeneca is evaluating Ranbaxy's notice and continues to have full confidencein its intellectual property protecting NexiumTM. PulmicortTM RespulesTM (budesonide inhalation suspension) In September 2005, AstraZeneca received a notice from IVAX Pharmaceuticals, Inc.that IVAX has submitted an Abbreviated New Drug Application to the US Food andDrug Administration for a budesonide inhalation suspension containing aparagraph IV certification alleging invalidity and non-infringement in respectof certain of AstraZeneca's patents relating to budesonide inhalationsuspension. In October 2005, AstraZeneca filed a patent infringement action against IVAX inthe US District Court for the District of New Jersey. SeroquelTM (quetiapine fumarate) In September 2005, AstraZeneca received a notice from Teva Pharmaceuticals USAthat Teva has submitted an Abbreviated New Drug Application to the US Food andDrug Administration for quetiapine fumarate tablets (25mg base) containing aparagraph IV certification alleging invalidity and non-infringement in respectof AstraZeneca's US patent number 4,879,288. AstraZeneca's US patent number4,879,288 is listed in the FDA's Orange Book in reference to SeroquelTM. AstraZeneca is evaluating Teva's notice and continues to have full confidence inits intellectual property protecting SeroquelTM. The 45 day time period within which AstraZeneca can commence a patentinfringement lawsuit against Teva that would automatically stay, or bar, the FDAfrom approving Teva's ANDA for 30 months (or until an adverse court decision,whichever occurs earlier) has not yet expired. AstraZeneca has been served in the US with approximately 40 SeroquelTM cases inwhich plaintiffs have alleged that they developed diabetes, and in some casespancreatitis, as a result of taking SeroquelTM or other atypical anti-psychoticsmade by other pharmaceutical companies. Eli Lilly, the maker of olanzapine, isa defendant in all but four of these cases and Janssen Pharmaceutica is adefendant in more than a dozen of the matters. The vast majority of these casesrecently were filed in Missouri. All of the Missouri cases were filed a day ortwo before Missouri's tort reform laws became effective. AstraZeneca has beeninformed that other cases involving SeroquelTM were filed in Missouri but havenot yet been served. Only two of the pending SeroquelTM cases involvingdiabetes allegations have gone beyond the pleadings stage. AstraZeneca intendsvigorously to defend the claims in these actions. Toprol-XLTM (metoprolol succinate) As disclosed in the Annual Report and Form 20-F Information 2004, patentlitigation is continuing in the US against KV Pharmaceutical Company, AndrxPharmaceuticals LLC and Eon Labs Manufacturing Inc. relating to those companies'notifications of their intentions to market generic versions of Toprol-XLTMtablets prior to the expiration of AstraZeneca's relevant patents. All of thepatent litigation has been consolidated for pre-trial discovery purposes andmotion practice in the US District Court for the Eastern District of Missouri.As previously disclosed, in January 2005 AstraZeneca filed a terminal disclaimerof the Toprol-XLTM patents-in-suit over one of the other patents raised by thedefendants, which will result in a revision of the expiration date of theToprol-XLTM patents-in-suit from March 2008 to September 2007. Under theAbbreviated New Drug Application statute, the US Food and Drug Administrationmay not approve Andrx's product before June 2006 or Eon's product before August2006, unless there is an earlier adverse court decision. The 30 months' stay inrespect of KV's product has expired. The trial in the proceedings is scheduled to commence in February 2006 and willlikely consolidate the cases against KV, Andrx and Eon. Oral arguments on thepending summary judgement motions on the infringement and validity of thepatents, those motions having been filed by the defendants in December 2004,were scheduled for November 2005. In September 2005, AstraZeneca received a paragraph IV notification from KV ofits intention to market metoprolol succinate tablets in the 25mg dose prior tothe expiration of AstraZeneca's patents. AstraZeneca has filed a patentinfringement suit against KV in the US District Court for the Eastern Districtof Missouri. AstraZeneca maintains that its patents are valid, enforceable and infringed bythe KV, Andrx and Eon products. Average wholesale price class action litigation As disclosed in the Annual Report and Form 20-F Information 2004, AstraZenecawas named as a defendant along with 24 other pharmaceutical manufacturers in aclass action suit, in Massachusetts, brought on behalf of a putative class ofplaintiffs alleged to have overpaid for prescription drugs as a result ofinflated wholesale list prices. The suit seeks to recover unspecified damages.AstraZeneca was also named as a co-defendant with various other pharmaceuticalmanufacturers in similar suits filed in nine other states. Most of these suitswere consolidated with the Massachusetts action for pre-trial purposes, pursuantto federal multi-district litigation procedures. In August 2005, the District Court in Boston issued a decision on classcertification favourable to the defendants. The plaintiffs had sought tocertify three nationwide classes of plaintiffs: (1) Medicare Part Bbeneficiaries who paid allegedly inflated co-payments for certainphysician-administered (injectable) drugs reimbursed under the Medicare Part Bprogramme; (2) third-party payers offering MediGap coverage for the samephysician-administered drugs or otherwise reimbursed outside Medicare for thedrugs; and (3) payers for certain non-Part B (self-administered) drugs. The court denied the self-administered drug class entirely. As to the twoproposed classes involving physician-administered drugs, the court conditionallycertified a nationwide class of Part B beneficiaries, provided that theplaintiffs can amend the complaint to include as class representativesindividual Part B beneficiaries who actually paid Medicare co-payments for thenamed drugs. The second proposed physician-administered drug class, third-partypayers who reimbursed for physician-administered drugs or covered Part Bco-payments, was certified only as a Massachusetts state, as opposed to anationwide, class. In both classes, the only AstraZeneca drug at issue isZoladexTM (goserelin acetate implant). Drug importation anti-trust litigation As disclosed in the Annual Report and Form 20-F Information 2004 and Half YearResults 2005, AstraZeneca Pharmaceuticals LP and eight other pharmaceuticalmanufacturers have been defending a purported class action filed in the USDistrict Court for Minnesota which alleged that the defendants conspired toprevent American consumers from purchasing prescription drugs from Canada, "depriving consumers of the ability to purchase" drugs at competitive prices.Earlier in 2005, the chief magistrate judge assigned to the case issued a reporton the defendants' motion to dismiss the case, making certain recommendations tothe presiding district court judge. The report recommended dismissal of theplaintiffs' federal anti-trust claims, but not dismissal of the state statutoryand common law claims. In August 2005, the district court dismissed withprejudice the plaintiffs' federal anti-trust claims. As to the state statutoryand common law claims, the district court declined to exercise supplementaljurisdiction and dismissed them without prejudice. The plaintiffs have appealedthe district court's decision. In the similar California state courtproceedings, the trial is scheduled to commence in July 2006. Avorelin In 1999, AstraZeneca UK Limited entered into a licence agreement with Mediolanumfarmaceutici S.p.A. under which Mediolanum licensed to AstraZeneca certainrights in respect of avorelin, a luteinising hormone-releasing hormone agonist.At the end of 2000, AstraZeneca terminated the agreement. Mediolanum hascommenced proceedings against AstraZeneca alleging that AstraZeneca breached theterms of the agreement and claiming damages. AstraZeneca denies any breach ofthe agreement and is vigorously defending the proceedings. The trial in theproceedings is scheduled to commence in the English courts in February 2006. General With respect to each of the legal proceedings described above, we are unable tomake estimates of the loss or range of losses at this stage, other than wherenoted in the case of the European Commission fine. We also do not believe thatdisclosure of the amount sought by plaintiffs, if that is known, would bemeaningful with respect to those legal proceedings. Arrangements with Merck As described in more detail in the Annual Report and Form 20-F Information 2004,AstraZeneca has significant arrangements with Merck & Co., Inc. relating tocertain of our products and development compounds (the agreement products).These arrangements include exit provisions from 2008 onwards and we regularlymonitor the value of the benefits we expect to receive. The exit provisions are subject to a minimum overall net payment of $3.3 billionand will offer AstraZeneca unencumbered discretion in its operations in the USmarket (except in respect of PrilosecTM and NexiumTM) without the restrictionsof various contractual obligations that are currently imposed as a result ofMerck's interests, together with relief from contingent payment obligations.The projected value of the benefits obtained in 2008 depends on a number offactors including the future contributions from products that have already beenlaunched, those that are due to be launched in the US and those that are indevelopment together with the further value AstraZeneca can extract from greaterfreedom to operate in the US. 4 FULL YEAR TERRITORIAL SALES ANALYSIS % Growth Full Year Full Year 2005 2004 Constant $m $m Actual Currency US 10,771 9,631 12 12 Canada 976 876 11 2 North America 11,747 10,507 12 11 France 1,654 1,597 4 1 UK 757 589 29 27 Germany 1,223 994 23 20 Italy 1,152 1,082 6 3 Sweden 295 298 (1) (3) Europe others 3,382 3,089 9 6 Total Europe 8,463 7,649 11 8 Japan 1,527 1,430 7 8 China 272 203 34 33 Rest of World 1,941 1,637 19 13Total 23,950 21,426 12 10 5 FOURTH QUARTER TERRITORIAL SALES ANALYSIS % Growth 4th Quarter 4th Quarter 2005 2004 Constant $m $m Actual Currency US 2,907 2,657 9 9 Canada 257 225 14 5 North America 3,164 2,882 10 9 France 389 389 - 3 UK 196 157 25 28 Germany 306 277 10 13 Italy 274 273 - 3 Sweden 63 76 (17) (12) Europe others 861 816 6 7 Total Europe 2,089 1,988 5 7 Japan 424 412 3 8 China 76 57 33 31 Rest of World 533 460 16 10Total 6,286 5,799 8 9 6 FULL YEAR PRODUCT SALES ANALYSIS World US Full Year Full Year Actual Constant Full Year Actual 2005 2004 Growth Currency 2005 Growth $m $m % Growth $m % %Gastrointestinal: Losec 1,652 1,947 (15) (17) 264 (28)Nexium 4,633 3,883 19 18 3,125 15Others 70 88 (20) (21) 14 (58)Total Gastrointestinal 6,355 5,918 7 5 3,403 9Cardiovascular: Zestril 332 440 (25) (27) 6 (91)Seloken/Toprol-XL 1,735 1,387 25 24 1,291 32Atacand 974 879 11 8 232 (8)Plendil 360 455 (21) (23) 84 (49)Tenormin 352 368 (4) (5) 25 (29)Crestor 1,268 908 40 38 730 34Others 311 340 (9) (12) 4 (71)Total Cardiovascular 5,332 4,777 12 10 2,372 15Respiratory:Pulmicort 1,162 1,050 11 9 682 18Rhinocort 387 361 7 6 277 7Symbicort 1,006 797 26 22 - -Accolate 72 116 (38) (39) 46 (45)Oxis 91 101 (10) (14) - -Others 155 158 (2) (5) - -Total Respiratory 2,873 2,583 11 9 1,005 9Oncology:Zoladex 1,004 917 9 7 117 (23)Casodex 1,123 1,012 11 10 239 3Nolvadex 114 134 (15) (16) 5 150Arimidex 1,181 811 46 44 476 59Iressa 273 389 (30) (31) 66 (63)Faslodex 140 99 41 39 90 11Others 10 14 (29) (36) - -Total Oncology 3,845 3,376 14 12 993 5Neuroscience:Seroquel 2,761 2,027 36 35 2,003 33Zomig 352 356 (1) (3) 121 (18)Diprivan 369 500 (26) (27) 147 (44)Local anaesthetics 511 542 (6) (8) 70 (47)Others 66 71 (7) (8) 18 (10)Total Neuroscience 4,059 3,496 16 15 2,359 14Infection and Other:Merrem 505 423 19 15 85 25Other Products 334 293 14 13 190 36Total Infection and Other 839 716 17 14 275 32Aptium Oncology 335 304 10 10 335 10Astra Tech 312 256 22 19 29 53Total 23,950 21,426 12 10 10,771 12 7 FOURTH QUARTER PRODUCT SALES ANALYSIS World US 4th 4th Constant 4th Quarter Quarter Actual Currency Quarter Actual 2005 2004 Growth Growth 2005 Growth $m $m % % $m %Gastrointestinal: Losec 411 446 (8) (8) 73 (8)Nexium 1,247 1,106 13 13 849 8Others 19 24 (21) (17) 6 (45)Total Gastrointestinal 1,677 1,576 6 6 928 6Cardiovascular: Zestril 84 113 (26) (26) 10 (52)Seloken/Toprol-XL 455 381 19 19 346 29Atacand 247 240 3 3 53 (16)Plendil 73 94 (22) (22) 6 (77)Tenormin 90 97 (7) (5) 8 (11)Crestor 353 312 13 12 203 4Others 76 84 (10) (10) 1 (50)Total Cardiovascular 1,378 1,321 4 4 627 7Respiratory:Pulmicort 338 313 8 8 212 13Rhinocort 92 93 (1) (2) 63 (7)Symbicort 264 219 21 22 - -Accolate 17 32 (47) (47) 11 (54)Oxis 22 25 (12) (12) - -Others 40 40 - 3 - -Total Respiratory 773 722 7 7 286 2Oncology:Zoladex 252 242 4 5 23 (32)Casodex 283 276 3 5 60 (5)Nolvadex 28 35 (20) (17) 2 -Arimidex 325 233 39 40 131 58Iressa 72 80 (10) (9) 17 -Faslodex 39 26 50 50 23 21Others 2 3 (33) (33) - -Total Oncology 1,001 895 12 13 256 19Neuroscience:Seroquel 755 562 34 34 553 34Zomig 94 89 6 6 39 11Diprivan 88 126 (30) (29) 35 (44)Local anaesthetics 131 144 (9) (9) 22 (41)Others 16 17 (6) - 5 -Total Neuroscience 1,084 938 16 16 654 18Infection and Other:Merrem 130 113 15 14 24 71Other Products 72 86 (16) (16) 36 (28)Total Infection and Other 202 199 2 1 60 (6)Aptium Oncology 88 78 13 13 88 13Astra Tech 83 70 19 20 8 33Total 6,286 5,799 8 9 2,907 9 Convenience Translation of Key Financial Information 2005 2004 2005 2004 2005 2004 For the quarter ended 31 December $m $m £m £m SEKm SEKm Total Sales 6,286 5,799 3,646 3,364 49,951 46,081 Operating profit 1,636 1,271 949 737 13,000 10,100Profit before tax 1,689 1,295 980 751 13,421 10,291Net profit for the period 1,227 929 712 539 9,750 7,382 Earnings per Ordinary Share $0.77 $0.55 £0.45 £0.32 SEK6.12 SEK4.37 2005 2004 2005 2004 2005 2004For the year ended 31 December $m $m £m £m SEKm SEKm Total Sales 23,950 21,426 13,893 12,429 190,315 170,258 Operating profit 6,502 4,547 3,772 2,638 51,667 36,132Profit before tax 6,667 4,844 3,867 2,810 52,978 38,492Net profit for the year 4,724 3,683 2,740 2,136 37,539 29,266 Basic earnings per Ordinary $2.91 $2.18 £1.69 £1.26 SEK23.12 SEK17.32ShareEarnings per Ordinary Share $2.91 $2.01 £1.69 £1.17 SEK23.12 SEK15.97before exceptional itemsDividend per Ordinary Share $1.30 $0.94 £0.737 £0.503 SEK10.01 SEK6.697Net cash inflow from operating 6,743 4,817 3,911 2,794 53,582 38,278activitiesIncrease in cash & cash 989 3,026 574 1,755 7,859 24,046equivalentsCapital and Reserves 13,597 14,404 7,887 8,355 108,047 114,459Attributable to Equity Holders All Sterling (£) and Swedish krona (SEK) equivalents are shown for convenienceand have been calculated using the current period end rates of $1= £ 0.58008 and$1= SEK 7.94635, respectively. Dividend per Ordinary Share is shown as theactual amount payable using the rates at the date of declaration of thedividend. Information for US Investors RECONCILIATION TO UNITED STATES ACCOUNTING PRINCIPLES The consolidated income statement and balance sheet set out on pages 13 and 15are prepared in accordance with IASs and IFRSs (collectively "IFRS") endorsed bythe European Union and available for use by European companies at 31 December2005. The following is a summary of the differences between IFRS and accountingprinciples generally accepted in the United States (US GAAP) as they apply toAstraZeneca PLC. Purchase accounting adjustments Under IFRS, the merger of Astra and Zeneca is accounted for as a 'merger ofequals' (pooling-of-interests) as a result of the business combinationsexemption permitted by IFRS 1 'First-time Adoption of International FinancialReporting Standards'. Under US GAAP the merger was accounted for as theacquisition of Astra by Zeneca using 'purchase accounting'. Under purchaseaccounting, the assets and liabilities of the acquired entity are recorded atfair value. As a result of the fair value exercise, increases in the values ofAstra's tangible fixed assets and inventory were recognised and valuesattributed to its in-process research and development and existing products,together with appropriate deferred taxation effects. The difference between thecost of investment and the fair value of the assets and liabilities of Astra wasrecorded as goodwill. The amount allocated to in-process research anddevelopment was, as required by US GAAP, expensed immediately in the firstreporting period after the business combination. Fair value adjustments to therecorded amount of inventory were expensed in the period the inventory wasutilised. Additional amortisation and depreciation have also been recorded inrespect of the fair value adjustments to tangible and intangible assets. Under IFRS, up until 31 December 2002, goodwill was required to be capitalisedand amortised. From 1 January 2003 goodwill is tested annually for impairmentbut not amortised. Under US GAAP, there is an equivalent requirement, but theeffective date was 1 January 2002. Capitalisation of interest AstraZeneca does not capitalise interest under IFRS. US GAAP requires interestincurred as part of the cost of constructing fixed assets to be capitalised andamortised over the life of the asset. Deferred taxation The IFRS full provision for deferred taxation is made although there are anumber of different bases from US GAAP on which this calculation is made, forexample, the elimination of intra-group profit on inventories and share-basedpayment transactions. Deferred taxation is provided on a full liability basisunder US GAAP, which requires deferred tax assets to be recognised without avaluation allowance if their realisation is considered to be more likely thannot. Pension and post-retirement benefits IFRS requires that in respect of defined benefit plans, obligations are measuredat discounted fair value whilst plan assets are recorded at fair value. Theoperating and financing costs of such plans are recognised separately in theincome statement; service costs are spread systematically over the lives ofemployees and financing costs are recognised in the periods in which they arise. US GAAP adopts a similar approach. Under IFRS, actuarial gains and losses arepermitted to be recognised immediately in the statement of recognised income andexpense. Under US GAAP, such actuarial gains and losses are permitted to beamortised on a straight-line basis over the average remaining service period ofemployees. A minimum pension liability is also recognised through othercomprehensive income in certain circumstances when there is a deficit of planassets relative to the accumulated benefits obligation. Intangible assets Under IFRS certain payments for rights to compounds in development arecapitalised. Under US GAAP these payments are generally expensed. Financial instruments and hedging activities Under IFRS, financial assets and certain financial liabilities (includingderivatives) are recognised at fair value; movements in the fair value may berecorded in equity or through income, depending upon their categorisation.Under US GAAP, marketable equity and all debt securities are recognised at fairvalue, with movements in fair value taken to a separate component of equity.Derivatives are also measured at fair value with movements taken through income.However, financial liabilities are recorded at amortised cost. New accounting standards adopted AstraZeneca has adopted the provisions of SFAS No. 123 (R) 'Share-Based Payment'in the period under review. SFAS No. 123 (R) requires compensation cost relatedto share based payments to be recognised in the financial statements.AstraZeneca has used the transitional arrangements for modified retrospectiveapplication in adopting SFAS No. 123 (R). As a consequence, the comparative USGAAP income before tax has been reduced by $147 million with a related taxcredit of $58 million and the shareholders' equity at 31 December 2004 increasedby $163m. RECONCILIATION TO UNITED STATES ACCOUNTING PRINCIPLES (CONTINUED) The approximate effects on income and shareholders' equity of the GAAPdifferences are shown in the following tables. As restatedIncome attributable to Shareholders 2005 2004For the year ended 31 December $m $m Net income for the period under IFRS from continuingoperations 4,706 3,664 Adjustments to conform to US GAAP Purchase accounting adjustments (amortisation and depreciation) (1,019) (1,014)Capitalisation less disposals and amortisation of interest (13) (1)Deferred taxation - on purchase accounting adjustments 283 283 - others 65 55 Pension expense and other post-retirement benefits expense (74) (52)Financial instruments (35) 61In-licensed development intangibles (29) (46)Other - 1Net income in accordance with US GAAP 3,884 2,951 Net income per Ordinary Share under US GAAP - basic and diluted $2.40 $1.76 RECONCILIATION TO UNITED STATES ACCOUNTING PRINCIPLES (CONTINUED) Shareholders' equity As at 31 December As restated 2005 2004 $m $m Shareholders' equity under IFRS 13,597 14,404 Adjustments to conform to US GAAPPurchase accounting adjustments: - goodwill 13,562 15,229- tangible and intangible fixed assets 5,229 6,988 Capitalisation, less disposals and amortisation of interest 241 254Deferred taxation - on purchase accounting adjustments (1,629) (2,134)- others (492) (618) Pension and other post-retirement benefits 1,483 1,418Financial instruments 18 22In-licensed development intangibles (112) (83)Other (3) (3)Shareholders' equity in accordance with US GAAP 31,894 35,477 Shareholder Information ANNOUNCEMENTS AND MEETINGS Announcement of first quarter 2006 results 27 April 2006 Annual General Meeting 2006 27 April 2006 Announcement of second quarter and half year 2006 results 27 July 2006 Announcement of third quarter and nine months 2006 26 October 2006results DIVIDENDS The record date for the first interim dividend paid on 19 September 2005 was 12August 2005. Ordinary Shares traded ex-dividend on the London and StockholmStock Exchanges from 10 August 2005. ADRs traded ex-dividend on the New YorkStock Exchange from the same date. The record date for the second interim dividend for 2005 payable on 20 March2006 (in the UK, Sweden and the US) will be 10 February 2006. Ordinary Shareswill trade ex-dividend on the London and Stockholm Stock Exchanges from 8February 2006. ADRs will trade ex-dividend on the New York Stock Exchange fromthe same date. Dividends will normally be paid as follows: First interim Announced in July and paid in September Second interim Announced in January/February and paid in March TRADEMARKS The following brand names used in this interim report are trademarks of theAstraZeneca group of companies: Accolate Arimidex Astra Tech Atacand Casodex Crestor Diprivan ExantaFaslodex Iressa Losec Merrem Nexium Nolvadex Oxis Plendil PrilosecPulmicort Pulmicort Respules Rhinocort Rhinocort Aqua Seloken SeroquelSymbicort Symbicort Maintenance and Reliever Therapy Tenormin Toprol-XLZactima Zestril Zoladex Zomig ADDRESSES FOR CORRESPONDENCE Registrar and Depositary Registered Office Swedish SecuritiesTransfer Office for ADRs Registration Centre The AstraZeneca Registrar JP Morgan Chase Bank 15 Stanhope Gate VPC ABLloyds TSB Registrars JP Morgan Service Center London PO Box 7822The Causeway PO Box 3408 W1K 1LN SE-103 97 StockholmWorthing South Hackensack UK SwedenWest Sussex NJ 07606-3408BN99 6DA USUK Tel: +44 (0)20 7304 5000 Tel: +46 (0)8 402 9000Tel (freephone in UK): Tel (toll free in US):0800 389 1580 888 697 8018Tel (outside UK): Tel (outside US):+44 (0)121 415 7033 +1 (201) 680 6630 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS In order to utilise the 'Safe Harbor' provisions of the United States PrivateSecurities Litigation Reform Act of 1995, AstraZeneca is providing the followingcautionary statement. This preliminary announcement contains forward-lookingstatements with respect to the financial condition, results of operations andbusinesses of AstraZeneca. By their nature, forward-looking statements andforecasts involve risk and uncertainty because they relate to events and dependon circumstances that will occur in the future. There are a number of factorsthat could cause actual results and developments to differ materially from thatexpressed or implied by these forward-looking statements. These factorsinclude, among other things, the loss or expiration of patents, marketingexclusivity or trade marks; exchange rate fluctuations; the risk that R&D willnot yield new products that achieve commercial success; the impact ofcompetition, price controls and price reductions; taxation risks; the risk ofsubstantial product liability claims; the impact of any failure by third partiesto supply materials or services; the risk of delay to new product launches; thedifficulties of obtaining and maintaining governmental approvals for products;and the risk of environmental liabilities. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Astrazeneca