31st Jan 2008 11:00
AstraZeneca PLC31 January 2008 Consolidated Income Statement 2007 2006For the year ended 31 December $m $m Sales 29,559 26,475 Cost of sales (6,419) (5,559) Distribution costs (248) (226) Research and development (5,162) (3,902) Selling, general and administrative costs (10,364) (9,096) Other operating income and expense 728 524 Operating profit 8,094 8,216 Finance income 959 888 Finance expense (1,070) (561) Profit before tax 7,983 8,543 Taxation (2,356) (2,480) Profit for the period 5,627 6,063 Attributable to: Equity holders of the Company 5,595 6,043 Minority interests 32 20 5,627 6,063 Basic earnings per $0.25 Ordinary Share $3.74 $3.86 Diluted earnings per $0.25 Ordinary Share $3.73 $3.85 Weighted average number of Ordinary Shares in issue (millions) 1,495 1,564 Diluted average number of Ordinary Shares in issue (millions) 1,498 1,570 Dividends for the period 2,740 2,649 Consolidated Income Statement 2007 2006For the quarter ended 31 December $m $m Sales 8,170 7,154 Cost of sales (1,821) (1,578) Distribution costs (67) (61) Research and development (1,432) (1,124) Selling, general and administrative costs (3,055) (2,511) Other operating income and expense 134 123 Operating profit 1,929 2,003 Finance income 256 267 Finance expense (348) (167) Profit before tax 1,837 2,103 Taxation (562) (658) Profit for the period 1,275 1,445 Attributable to: Equity holders of the Company 1,266 1,432 Minority interests 9 13 1,275 1,445 Basic earnings per $0.25 Ordinary Share $0.86 $0.93 Diluted earnings per $0.25 Ordinary Share $0.86 $0.93 Weighted average number of Ordinary Shares in issue (millions) 1,464 1,540 Diluted average number of Ordinary Shares in issue (millions) 1,466 1,545 Consolidated Balance Sheet 2007 2006As at 31 December $m $mASSETS Non-current assets Property, plant and equipment 8,298 7,453Goodwill 9,884 1,097Intangible assets 11,467 3,107Other investments 182 119Deferred tax assets 1,044 1,220 30,875 12,996 Current assets Inventories 2,119 2,250Trade and other receivables 6,668 5,561Other investments 177 657Income tax receivable 2,251 1,365Cash and cash equivalents 5,867 7,103 17,082 16,936Total assets 47,957 29,932 LIABILITIES Current liabilities Interest bearing loans and borrowings (4,280) (136)Trade and other payables (6,968) (6,295)Provisions (387) (39)Income tax payable (3,552) (2,977) (15,187) (9,447)Non-current liabilities Interest bearing loans and borrowings (10,876) (1,087)Deferred tax liabilities (4,119) (1,559)Retirement benefit obligations (1,998) (1,842)Provisions (633) (327) Other payables (229) (254) (17,855) (5,069)Total liabilities (33,042) (14,516)Net assets 14,915 15,416 EQUITY Capital and reserves attributable to equity holders of the Company Share capital 364 383 Share premium account 1,888 1,671 Other reserves 1,902 1,902 Retained earnings 10,624 11,348 14,778 15,304 Minority equity interests 137 112 Total equity 14,915 15,416 Consolidated Cash Flow Statement 2007 2006For the year ended 31 December $m $m Cash flows from operating activities Profit before taxation 7,983 8,543Finance income and expense 111 (327)Depreciation, amortisation and impairment 1,856 1,345(Increase)/decrease in working capital (443) 108Other non-cash movements 901 263Cash generated from operations 10,408 9,932 Interest paid (335) (70) Tax paid (2,563) (2,169) Net cash inflow from operating activities 7,510 7,693 Cash flows from investing activities Acquisition of business operations (14,891) (1,148)Movement in short term investments and fixed deposits 894 1,120Purchase of property, plant and equipment (1,130) (794)Disposal of property, plant and equipment 54 35Purchase of intangible assets (549) (545)Disposal of intangible assets - 661Purchase of non-current asset investments (35) (17)Disposal of non-current asset investments 421 68Interest received 358 352Dividends paid by subsidiaries to minority interest (9) (4)Net cash outflow from investing activities (14,887) (272)Net cash (outflow)/inflow before financing activities (7,377) 7,421Cash flows from financing activities Proceeds from issue of share capital 218 985Repurchase of shares (4,170) (4,147)Dividends paid (2,641) (2,220)Repayment of loans (1,165) -Issue of loans 9,692 -Movement in short term borrowings 4,117 16Net cash inflow/(outflow) from financing activities 6,051 (5,366)Net (decrease)/increase in cash and cash equivalents in the period (1,326) 2,055 Cash and cash equivalents at the beginning of the period 6,989 4,895Exchange rate effects 64 39Cash and cash equivalents at the end of the period 5,727 6,989Cash and cash equivalents consists of:Cash and cash equivalents 5,867 7,103Overdrafts (140) (114) 5,727 6,989 Consolidated Statement of Recognised Income and Expense 2007 2006For the year ended 31 December $m $mProfit for the period 5,627 6,063 Foreign exchange and other adjustments on consolidation 492 922 Foreign exchange differences on borrowings (40) - Cash flow hedge in anticipation of debt issue (21) - Available for sale losses taken to equity (9) (20) Actuarial loss for the period (113) (108) Tax on items taken directly to reserves 33 137 342 931 Total recognised income and expense for the period 5,969 6,994 Attributable to: Equity holders of the Company 5,934 6,970 Minority interests 35 24 5,969 6,994 Notes to the Preliminary Announcement 1 BASIS OF PREPARATION AND ACCOUNTING POLICIES The preliminary announcement for the full year ended 31 December 2007 has beenprepared in accordance with International Accounting Standards and InternationalFinancial Reporting Standards (collectively "IFRS") as adopted by the EuropeanUnion (EU) and as issued by the International Accounting Standards Board.Details of the accounting policies applied are those set out in AstraZenecaPLC's Annual Report and Form 20-F Information 2006. The annual financialinformation presented in this preliminary announcement for the year ended 31December 2007 is based on, and is consistent with, that in the Group's auditedfinancial statements for the year ended 31 December 2007, and those financialstatements will be delivered to the Registrar of Companies following theCompany's Annual General Meeting. The auditor's report on those financialstatements is unqualified and does not contain any statement under Section 237of the Companies Act 1985. The information contained in Note 5 updates the disclosures concerning legalproceedings and contingent liabilities in the Company's Annual Report and Form20-F Information 2006 and the Third Quarter and Nine Months Results 2007. 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 2006 have been filedwith the Registrar of Companies. The auditors' report on those accounts wasunqualified and did not contain any statement under Section 237 of the CompaniesAct 1985. 2 NET DEBT The table below provides an analysis of net debt and a reconciliation of netcash flow to the movement in net debt. Acquisitions At 31 December At 1 Jan Cash $m Non-cash Exchange 2007 2007 flow movements movements $m $m $m $m $m Loans due after 1 year (1,087) (9,692) - (57) (40) (10,876) Current instalments of loans - 1,165 (1,165) - - -Total loans (1,087) (8,527) (1,165) (57) (40) (10,876)Other investments - current 657 (894) 279 132 3 177Cash and cash equivalents 7,103 (1,301) - - 65 5,867Overdrafts (114) (25) - - (1) (140)Short term borrowings (22) (4,117) - - (1) (4,140) 7,624 (6,337) 279 132 66 1,764Net funds/(debt) 6,537 (14,864) (886) 75 26 (9,112) Non-cash movements in the period include fair value adjustments under IAS 39. 3 MEDIMMUNE, INC. ACQUISITION On 1 June 2007, AstraZeneca announced the successful tender offer for all theoutstanding shares of common stock of MedImmune, Inc., a world-leadingbiotechnology company with proven biologics discovery and development strength,pipeline and leading biomanufacturing. At that date, approximately 96.0% of theoutstanding shares were successfully tendered; the remaining shares wereacquired by 18 June 2007. The financial results of MedImmune, Inc. have beenconsolidated into the Company's results from 1 June 2007. Cash consideration of $13.9 billion was paid for the outstanding shares. Aftertaking account of the cash and investments acquired, together with thesettlement of MedImmune's convertible debt and outstanding share options, thetotal cash paid to acquire MedImmune is $15.6 billion. In most business acquisitions, there is a part of the cost that is not capableof being attributed in accounting terms to identifiable assets and liabilitiesacquired and is therefore recognised as goodwill. In the case of theacquisition of MedImmune, this goodwill is underpinned by a number of elements,which individually cannot be quantified. Most significant amongst these is thepremium attributable to a pre-existing, well positioned business in theinnovation intensive, high growth biologics market with a highly skilledworkforce and established reputation. Other important elements include buyerspecific synergies, potential additional indications for identified products andthe core technological capabilities and knowledge base of the company. MedImmune, Inc. contributed $714 million (Q4: $549 million) of turnover in theperiod since acquisition. After amortisation, net investments/interest costs(including interest costs of external financing of $446 million (Q4: $203million) and tax), the loss attributable to MedImmune since acquisition is $410million (Q4: $55 million). If the acquisition had taken effect at the beginningof the reporting period (1 January 2007), on a proforma basis the revenue,profit before tax and profit after tax of the combined Group for the full yearwould have been $30,127 million, $7,576 million and $5,351 million,respectively. Basic and diluted Earnings per Share for the combined Group wouldhave been $3.56 and $3.55, respectively. This proforma information has beenprepared taking into account amortisation, interest costs and related taxeffects but does not purport to represent the results of the combined Group thatactually would have occurred had the acquisition taken place on 1 January 2007and should not be taken to be representative of future results. Fair value Book value adjustment Fair value $m $m $mNon-current assets Intangible assets 193 7,882 8,075Property, plant and equipment 523 70 593Other 550 (17) 533 1,266 7,935 9,201 Current assets 1,439 115 1,554 Current liabilities (326) 39 (287)Additional obligations related toconvertible debt and share options - (1,724) (1,724)Non-current liabilities Interest bearing loans and borrowings (1,165) - (1,165)Other payables (73) - (73)Deferred tax assets/(liabilities) 314 (2,694) (2,380) (924) (2,694) (3,618)Total assets acquired 1,455 3,671 5,126 Goodwill 8,757Total consideration for outstanding shares* 13,883Additional payments related to convertibledebt, share options and other acquisition 1,770obligationsLess: cash acquired (979)Net cash outflow 14,674 * The total consideration for outstanding shares includes $29m of directlyattributable costs. 4 RESTRUCTURING AND SYNERGY COSTS Profit before tax for the full year ended 31 December 2007 is stated aftercharging restructuring and synergy costs of $966 million ($362 million in thefourth quarter). These have been charged to the income statement as follows: 4th Quarter Full year $m $mCost of Sales 95 415R&D 36 73SG&A 231 478 Total 362 966 5 LEGAL PROCEEDINGS and contingent liabilities AstraZeneca is involved in various legal proceedings considered typical to itsbusiness, including litigation relating to employment matters, productliability, commercial disputes, infringement of intellectual property rights,the validity of certain patents, anti-trust, securities law and governmentalinvestigations. The matters discussed below constitute the more significantdevelopments since publication of the disclosures concerning legal proceedingsin the Company's Annual Report and Form 20-F Information 2006 and Third Quarterand Nine Months Results 2007. Matters disclosed in respect of the Fourth Quarter of 2007 and January 2008 CrestorTM (rosuvastatin)AstraZeneca lists three patents in the FDA Orange Book: No. RE37,314 coveringthe active ingredient (the '314 patent); No. 6,316,460 covering formulations(the '460 patent); and No. 6,858,618 covering medical use (the '618 patent). The'314 patent expires in January 2016, the '460 patent expires in August 2020, andthe '618 patent expires in December 2021. Between 30 October 2007 and 6 December2007, AstraZeneca received Paragraph IV certification notice-letters fromApotex, Inc. ("Apotex"); Aurobindo Pharma Limited ("Aurobindo"); CobaltPharmaceuticals Inc and Cobalt Laboratories Inc ("Cobalt"); GlenmarkPharmaceuticals Inc. USA ("Glenmark"); Mylan Pharmaceuticals, Inc. ("Mylan");Par Pharmaceutical, Inc. ("Par"); Sandoz, Inc ("Sandoz"); Sun PharmaceuticalsIndustries Limited ("Sun"); and Teva Pharmaceuticals USA, Inc. ("Teva"). Eachentity notified AstraZeneca that it had submitted an Abbreviated New DrugApplication (ANDA) to the US FDA for approval to market CrestorTM 5, 10, 20, and40mg rosuvastatin calcium tablets prior to the expiration of one or more ofAstraZeneca's three FDA Orange Book-listed patents. The notice-letters notifiedAstraZeneca that each respective ANDA contained a Paragraph IV certificationalleging non-infringement, invalidity, or unenforceability of one or more ofAstraZeneca's three patents. In December 2007, in response to notice-lettersfrom seven of the nine manufacturers, AstraZeneca Pharmaceuticals LP,AstraZeneca UK Limited, IPR Pharmaceuticals, Inc., and AstraZeneca's licensor,Shionogi Seiyaku Kabushiki Kaisha ("Shionogi"), filed separate lawsuits in theUnited States District Court for the District of Delaware, against Apotex,Aurobindo, Cobalt, Mylan, Par, Sandoz and Sun for infringement of the patentcovering rosuvastatin calcium, the active ingredient in CrestorTM tablets.AstraZeneca did not file patent infringement actions against Teva and Glenmark,because they did not seek approval to market products before the 2016 expirationdate of the patent covering the active ingredient. In addition to filingactions in the United States District Court for the District of Delaware, forprocedural reasons, AstraZeneca Pharmaceuticals LP, AstraZeneca UK Limited, IPRPharmaceuticals, Inc. and Shionogi filed three duplicate patent infringementactions against Mylan, Aurobindo and Cobalt respectively in United StatesDistrict Courts in West Virginia, New Jersey and Florida. These cases proceed. AstraZeneca continues to have full confidence in and will vigorously defend andenforce its intellectual property protecting CrestorTM. LosecTM/PrilosecTM (omeprazole) As previously disclosed, in 2001, AstraZeneca filed a suit in the US againstAndrx Pharmaceuticals, Inc. ("Andrx") for infringement of a patent number6,013,281 directed to a process for making an omeprazole formulation (the '281patent). Andrx filed counterclaims of non-infringement, invalidity andunenforceability for inequitable conduct during prosecution of the '281 patent.Andrx also asserted that in addition to the '281 patent, two other formulationpatents, numbered 4,786,505 and 4,853,230 (the '505 and '230 patents), wereunenforceable for alleged litigation misconduct by AstraZeneca. Both partiessought attorneys' fees. In May 2004, the US District Court for the SouthernDistrict of New York ruled that the '281 patent was infringed, but also ruledthat the '281 patent was invalid. The Federal Circuit has concluded that AstraZeneca's '505 and '230 formulationpatents remained enforceable. As a result of Andrx's infringement of '505 and '230 patents, AstraZeneca was the prevailing party against Andrx in the lowercourt. AstraZeneca is pursuing appropriate relief, including damages. NexiumTM (esomeprazole) Sales and marketing practices AstraZeneca entities have been sued in various state and federal courts in theUS in purported representative class actions involving the marketing of NexiumTM(esomeprazole magnesium). These actions generally allege that AstraZeneca'spromotion and advertising of NexiumTM to physicians and consumers is unfair,unlawful and deceptive conduct, particularly as the promotion relates tocomparisons of NexiumTM with PrilosecTM. They also allege that AstraZeneca'sconduct relating to the pricing of NexiumTM was unfair, unlawful and deceptive.The plaintiffs allege claims under various state consumer protection, unfairpractices and false advertising laws. The plaintiffs in these cases seekremedies that include restitution, disgorgement of profits, damages, punitivedamages, injunctive relief, attorneys' fees and costs of suit. In November 2005, the US District Court for the District of Delaware grantedAstraZeneca's motion to dismiss the consolidated class action complaint. InSeptember 2007, the US Court of Appeals for the Third Circuit affirmed thedismissal and denied plaintiffs' petition for Rehearing En Banc. On 18 December2007, plaintiffs filed a petition for writ of certiorari with the United StatesSupreme Court. AstraZeneca's response to the petition is due in February 2008.The Delaware state case has been stayed pending the outcome of the Delawarefederal cases. Patent Litigation In December 2007, AstraZeneca received another notice from Dr. Reddy'sLaboratories Inc. and Dr Reddy's Laboratories Limited ("Dr Reddy's") that Dr.Reddy's had submitted an ANDA to the FDA for esomeprazole magnesiumdelayed-release capsules, 20mg and 40mg. This notice challenges three OrangeBook-listed patents claiming esomeprazole magnesium (US Patent Nos. 5,714,504,5,877,192 and 6,875,872). AstraZeneca's exclusivity relating to these threepatents expires on 3 August 2015, 27 November 2014 and 27 November 2014,respectively. In January 2008, AstraZeneca commenced patent infringementlitigation in the US District Court for the District of New Jersey against Dr.Reddy's in response to Dr. Reddy's paragraph IV certifications regarding NexiumTM. No trial date has been set. A 30-month stay will not prevent the FDA from approving an ANDA, and an at-risklaunch by a generic drug manufacturer may occur, of delayed-release esomeprazolemagnesium capsules in the year ending 31 December 2008. In Canada, AstraZeneca Canada, Inc. received several notices of allegation fromApotex, Inc ("Apotex") in late 2007 in respect of patents listed on the PatentRegister in Canada for NexiumTM. Apotex has asserted in its notices that it hasfiled an abbreviated new drug submission ("ANDS") in March 2007, for 20 and 40mgesomeprazole magnesium trihydrate tablets and alleges non-infringement and/orinvalidity of numerous patents. AstraZeneca has responded by commencing sevencourt applications in January 2008 under the Patented Medicines (Notice ofCompliance) Regulations. On 17 January 2008, Apotex advised that its product waserroneously described as being a trihydrate in its recent allegations, whichallegations Apotex asserted it was withdrawing. Apotex mailed replacementallegations on 17 January 2008, which AstraZeneca is entitled to challenge.Apotex cannot obtain a notice of compliance (marketing approval) for itsesomeprazole tablets until the earlier of the disposition of all of the courtapplications in Apotex's favour or 24 months from the date on which the latestcourt application has been commenced. AstraZeneca has full confidence in and will vigorously defend and enforce itsintellectual property protecting NexiumTM. SeroquelTM (quetiapine fumarate) Product liability As previously disclosed, AstraZeneca Pharmaceuticals LP, either alone or inconjunction with one or more affiliates, has been sued in numerous individualpersonal injury actions involving SeroquelTM. In most of these cases, the natureof the plaintiffs' alleged injuries is not clear from the complaint and in mostcases, little or no factual information regarding the alleged injury has beenprovided in the complaint. However, the plaintiffs generally contend that theydeveloped diabetes and/or other related injuries as a result of taking SeroquelTM and/or other atypical anti-psychotic medications. As of 16 January 2008,AstraZeneca was defending 8,121 served or answered lawsuits involvingapproximately 12,347 plaintiff groups (24 January 2007: 604 served or answeredlawsuits involving approximately 7,450 plaintiff groups). To date, approximately1,900 additional cases have been dismissed by order or agreement andapproximately 1,400 of those cases have been dismissed with prejudice.Discovery directed to all parties is ongoing in most jurisdictions in theseSeroquelTM cases. Patent Litigation As previously disclosed, AstraZeneca has four pending patent infringement casesagainst Teva Pharmaceuticals USA, Inc. and Sandoz, Inc, which have beenconsolidated for the purpose of the proceeding discovery. A 30-month stay willnot prevent the FDA from approving an ANDA, and an at-risk launch by a genericdrug manufacturer may occur, of quetiapine fumarate tablets in the year ending31 December 2008. In October 2007, the Court granted AstraZeneca's partial summary judgementmotion based on collateral estoppel, which precludes Teva from relitigatingissues previously resolved against it in another previous patent litigationinvolving Eli Lilly's anti-psychotic drug, Zyprexa. AstraZeneca continues to have full confidence in its intellectual propertyprotecting SeroquelTM and will vigorously defend and enforce it. Sales and Marketing Practices In February 2007, the Commonwealth of Pennsylvania filed suit againstAstraZeneca, Eli Lilly & Co., and Janssen Pharmaceutica Inc. claiming damagesincurred by the Commonwealth as a result of alleged off-label promotion ofatypical anti-psychotics by the three manufacturers. The lawsuit is filed instate court in Philadelphia and seeks to recover the cost to the PennsylvaniaMedicaid program and other state-funded health insurance programs forprescriptions written as a result of the alleged off-label promotion. InDecember 2007, the Court granted defendants' motion to sever the claims againstAstraZeneca and Janssen from those against Eli Lilly and directed theCommonwealth to file separate complaints against the two severed defendants,which the Commonwealth did in January 2008. Although no similar lawsuits havebeen brought by states other than Pennsylvania, AstraZeneca has been informedthat the Attorney General's Offices of multiple other states have investigationsinto similar SeroquelTM off-label issues. AstraZeneca has signed agreementswith 20 states tolling the statutes of limitations on potential claims, and hasbeen approached by additional states for similar tolling agreements.AstraZeneca believes these claims to be without merit and intends to vigorouslydefend the Pennsylvania lawsuit. Average wholesale price class action litigation As previously disclosed, the District Court in Boston who is managing themulti-district average wholesale price litigation, certified three classes ofplaintiffs against the "Track 1" manufacturer defendants, AstraZeneca,GlaxoSmithKline, Bristol-Myers Squibb, Schering-Plough and Johnson & Johnson.The three certified classes are: (Class 1) nationwide class of consumers whomade co-payments for certain physician-administered drugs reimbursed under theMedicare Part B programme (Part B drugs); (Class 2) a Massachusetts-only classof third-party payers, including insurance companies, union health and welfarebenefit plans, and self-insured employers, who covered consumer co-payments forPart B drugs; and (Class 3) a Massachusetts-only class of third-party payers andconsumers who paid for Part B drugs outside of the Medicare programme. For allclasses, the only AstraZeneca drug at issue is ZoladexTM (goserelin acetateimplant). A bench trial against four of the Track 1 defendants, including AstraZeneca, byClasses 2 and 3 began in November 2006 and concluded in January 2007. A separatejury trial against AstraZeneca only, involving the Class 1 claims, was scheduledto begin in June 2007. However, in May 2007, the parties reached a proposedsettlement agreement resolving the Class 1 claims. The settlement, if ultimatelyapproved by the Court, will involve payments of up to $24 million, not includingattorneys' fees, to reimburse individual class members submitting claims.AstraZeneca has agreed that $10 million of any unclaimed amounts will be donatedto charitable organisations funding cancer patient care and research. Notice ofproposed settlement was mailed to potential class members in December 2007, andthe Court has scheduled a hearing for final approval of the settlement in May2008. A provision of $27 million was established in 2007. In June 2007 and November 2007, the Court issued its decision on Classes 2 and3. The Court found AstraZeneca liable under the Massachusetts consumerprotection statute for engaging in unfair and deceptive conduct in connectionwith the pricing of ZoladexTM during the period 1998 to 2003. The Court awardeddouble damages (with prejudgment interest) of $5.5 million for Class 2 andsingle damages (with prejudgment interest) of $7.4 million for Class 3.AstraZeneca believes the decision to be in error and has filed an appeal inwhich it is confident it will prevail and so no provision has been made forthese awards. The decision on Classes 2 and 3 and the settlement of Class 1 relate to ZoladexTM only. The multiple Attorney General lawsuits pending against AstraZeneca andother manufacturers nationwide, which involve numerous drugs in addition toZoladexTM, remain pending against the Company. The first of these casesscheduled for trial is the case filed by the Alabama Attorney General in statecourt in Montgomery, Alabama. That case is scheduled for a jury trial againstAstraZeneca beginning February 2008. Government investigations into drug marketing practices There are a number of active investigations led by state Attorneys General.These include multiple investigations relating to SeroquelTM off-label issues,along with an investigation by the Delaware Attorney General's Office intomarketing and sale activities within the State of Delaware. Serious Fraud Office Inquiry In December 2007, AstraZeneca received from the UK's Serious Fraud Office (SFO)a request for documentation about its involvement in the United Nations Oil forFood programme. AstraZeneca denies any allegation of illegal or unethicalbehaviour in our trading relationships with Iraq. We will comply with the SFO'srequest for documentation. Anti-Trust AstraZeneca is part of a sectoral Inquiry by the European Commission into thepharmaceutical industry and was the subject of an unannounced inspection inJanuary 2008. The Inquiry relates to the introduction of innovative and genericmedicines and it will cover commercial practices, including the use of patentsand generics. We understand that several companies have been similarlyapproached. The Commission has stated that this Inquiry is not aimed at investigatingpractices where there have been any indications of wrong-doing although it couldaddress any competition law breaches found by means of separate proceedings. TheCommission has also stated that it plans to issue an interim report in Autumn2008 and envisages that the final results of its Inquiry will be available inSpring 2009. AstraZeneca is co-operating fully with the Commission in relation to itsInquiry. TaxationWhere tax exposures can be quantified, an accrual is made based on bestestimates and management's judgement. Details of the movements in relation tomaterial tax exposures are discussed below. AstraZeneca faces a number of transfer pricing audits in jurisdictions aroundthe world and, in some cases, is in dispute with the tax authorities. The issuesunder discussion are often complex and can require many years to resolve.Accruals for tax contingencies require management to make estimates andjudgements with respect to the ultimate outcome of a tax audit, and actualresults could vary from these estimates. The international tax environmentpresents increasingly challenging dynamics for the resolution of transferpricing disputes. These disputes usually result in taxable profits beingincreased in one territory and correspondingly decreased in another. Ourbalance sheet positions for these matters reflect appropriate correspondingrelief in the territories affected. Management considers that at present suchcorresponding relief will be available but given the challenges in theinternational tax environment will keep this aspect under careful review. Thetotal net accrual included in the financial statements to cover the worldwideexposure to transfer pricing audits is $1,322 million, an increase of $327million due to a number of new audits, revisions of estimates relating toexisting audits, offset by a number of negotiated settlements. For transferpricing audits where AstraZeneca and the tax authorities are in dispute,AstraZeneca estimates the potential for reasonably possible additional lossesabove and beyond the amount provided to be up to $400 million; however,management believes that it is unlikely that these additional losses will arise.Of the remaining tax exposures, the Company does not expect material additionallosses. It is not possible to estimate the timing of tax cash flows in relationto each outcome, however, it is anticipated that a number of significantdisputes may be resolved over the next 1-2 years. Included in the provision isan amount of interest of $234 million. Interest is accrued as a tax expense. 6 FULL YEAR TERRITORIAL SALES ANALYSIS % Growth Full Year Full Year 2007 2006 Constant $m $m Actual Currency US 13,366 12,449 7 7 Canada 1,145 1,031 11 5 North America 14,511 13,480 8 7 Western Europe** 9,115 8,073 13 3 Japan 1,661 1,503 11 11 Other Established ROW 715 555 29 15 Established ROW* 11,491 10,131 13 5 Emerging Europe 1,028 831 24 12 China 437 328 33 28 Emerging Asia Pacific 749 646 16 10 Other Emerging ROW 1,343 1,059 27 21 Emerging ROW 3,557 2,864 24 17Total Sales 29,559 26,475 12 7 * Established ROW comprises Western Europe (including France, UK, Germany,Italy, Sweden and others), Japan, Australia and New Zealand. ** For the full year, Western Europe sales growth excluding SynagisTM would be11 percent on an actual basis and 1 percent on a constant currency basis. 7 FOURTH QUARTER TERRITORIAL SALES ANALYSIS % Growth 4th Quarter 4th Quarter 2007 2006 Constant $m $m Actual Currency US 3,665 3,390 8 8 Canada 331 263 26 10 North America 3,996 3,653 9 8 Western Europe*** 2,453 2,143 14 3 Japan 532 442 20 15 Other Established ROW 209 160 31 14 Established ROW* 3,194 2,745 16 5 Emerging Europe 293 216 36 17 China 124 87 43 36 Emerging Asia Pacific 204 180 13 6 Other Emerging ROW 359 273 32 22 Emerging ROW 980 756 30 18Total Sales 8,170 7,154 14 8 * Established ROW comprises Western Europe (including France, UK, Germany,Italy, Sweden and others), Japan, Australia and New Zealand. *** For the fourth quarter, Western Europe sales growth excluding SynagisTMwould be 10 percent on an actual basis and -2 percent on a constant currencybasis. 8 FULL YEAR PRODUCT SALES ANALYSIS World US Full Year Full Year Actual Constant Full Year Actual 2007 2006 Growth Currency 2007 Growth $m $m % Growth $m % %Gastrointestinal: Nexium 5,216 5,182 1 (2) 3,383 (4)Losec/Prilosec 1,143 1,371 (17) (20) 226 (3)Others 84 78 8 3 30 25Total Gastrointestinal 6,443 6,631 (3) (6) 3,639 (4)Cardiovascular: Crestor 2,796 2,028 38 33 1,424 24Seloken/Toprol-XL 1,438 1,795 (20) (22) 969 (30)Atacand 1,287 1,110 16 9 259 -Tenormin 308 320 (4) (8) 19 (21)Zestril 295 307 (4) (10) 18 (36)Plendil 271 275 (1) (7) 35 46Others 291 283 2 (5) 2 (33)Total Cardiovascular 6,686 6,118 9 5 2,726 (5)Respiratory:Symbicort 1,575 1,184 33 22 50 n/mPulmicort 1,454 1,292 13 10 964 15Rhinocort 354 360 (2) (4) 229 (9)Oxis 86 88 (2) (10) - -Accolate 76 81 (6) (7) 55 (7)Others 166 146 14 5 - -Total Respiratory 3,711 3,151 18 12 1,298 13Oncology:Arimidex 1,730 1,508 15 10 694 13Casodex 1,335 1,206 11 6 298 1Zoladex 1,104 1,008 10 4 92 (14)Iressa 238 237 - - 9 (44)Ethyol 43 - n/m n/m 43 n/mOthers 369 303 22 18 166 37Total Oncology 4,819 4,262 13 8 1,302 13Neuroscience:Seroquel 4,027 3,416 18 15 2,863 15Local anaesthetics 557 529 5 (1) 45 (41)Zomig 434 398 9 5 177 5Diprivan 263 304 (13) (17) 40 (53)Others 59 57 4 (2) 15 -Total Neuroscience 5,340 4,704 14 10 3,140 11Infection and Other:Synagis 618 - n/m n/m 449 n/mMerrem 773 604 28 20 149 32FluMist 53 - n/m n/m 53 n/mOther Products 270 271 - (4) 148 6Total Infection and Other 1,714 875 96 89 799 217Aptium Oncology 402 374 7 7 402 7Astra Tech 444 360 23 14 60 46Total 29,559 26,475 12 7 13,366 7 9 FOURTH QUARTER PRODUCT SALES ANALYSIS World US 4th 4th Constant 4th Quarter Quarter Actual Currency Quarter Actual 2007 2006 Growth Growth 2007 Growth $m $m % % $m %Gastrointestinal: Nexium 1,303 1,430 (9) (12) 815 (18)Losec/Prilosec 298 347 (14) (20) 58 (25)Others 24 24 - (4) 9 (10)Total Gastrointestinal 1,625 1,801 (10) (14) 882 (18)Cardiovascular: Crestor 799 625 28 21 386 8Seloken/Toprol-XL 209 387 (46) (50) 86 (69)Atacand 353 301 17 7 66 (3)Tenormin 84 82 2 (5) 5 -Zestril 67 78 (14) (22) 2 (71)Plendil 66 65 2 (6) 7 75Others 78 71 10 - - (100)Total Cardiovascular 1,656 1,609 3 (4) 552 (23)Respiratory:Symbicort 436 323 35 21 16 n/mPulmicort 447 400 12 8 307 13Rhinocort 87 90 (3) (7) 55 (13)Oxis 22 23 (4) (13) - -Accolate 19 22 (14) (18) 14 (18)Others 45 41 10 - - -Total Respiratory 1,056 899 17 10 392 12Oncology:Arimidex 474 412 15 8 187 7Casodex 370 327 13 6 78 (5)Zoladex 307 272 13 4 24 (11)Iressa 70 63 11 6 2 (50)Ethyol 16 - n/m n/m 16 n/mOthers 102 83 23 17 44 22Total Oncology 1,339 1,157 16 8 351 9Neuroscience:Seroquel 1,086 912 19 15 770 16Local anaesthetics 159 133 20 9 13 18Zomig 114 103 11 4 44 7Diprivan 74 79 (6) (13) 11 (50)Others 16 13 23 15 4 100Total Neuroscience 1,449 1,240 17 12 842 14Infection and Other:Synagis 480 - n/m n/m 391 n/mMerrem 215 167 29 18 42 45FluMist 53 - n/m n/m 53 n/mOther Products 68 81 (16) (22) 39 (7)Total Infection and Other 816 248 229 220 525 639Aptium Oncology 102 98 4 4 102 4Astra Tech 127 102 25 14 19 73Total 8,170 7,154 14 8 3,665 8 Convenience Translation of Key Financial Information 2007 2006 2007 2006 2007 2006For the quarter ended 31 December $m $m £m £m SEKm SEKm Total Sales 8,170 7,154 4,099 3,589 52,330 45,822 Operating profit 1,929 2,003 968 1,005 12,355 12,829Profit before tax 1,837 2,103 922 1,055 11,766 13,470Net profit for the period 1,275 1,445 640 725 8,167 9,255 Earnings per Ordinary Share $0.86 $0.93 £0.43 £0.47 SEK5.51 SEK5.96 2007 2006 2007 2006 2007 2006For the year ended 31 December $m $m £m £m SEKm SEKm Total Sales 29,559 26,475 14,830 13,283 189,328 169,575 Operating profit 8,094 8,216 4,061 4,122 51,843 52,624Profit before tax 7,983 8,543 4,005 4,286 51,132 54,719Net profit for the year 5,627 6,063 2,823 3,042 36,041 38,834 Earnings per Ordinary Share $3.74 $3.86 £1.88 £1.94 SEK23.96 SEK24.72Dividend per Ordinary Share $1.87 $1.72 £0.93 £0.90 SEK12.10 SEK12.20Net cash inflow from operatingactivities 7,510 7,693 3,768 3,860 48,102 49,274(Decrease)/increase in cash & (1,326) 2,055 (665) 1,031 (8,493) 13,162cash equivalentsCapital and Reserves 14,778 15,304 7,414 7,678 94,655 98,024Attributable 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= £0.501718 and $1= SEK6.405100 respectively. Dividend per Ordinary Share isshown as the actual amount payable using the rates at the date of declaration ofthe dividend. Shareholder Information ANNOUNCEMENTS AND MEETINGS Announcement of first quarter 2008 results 24 April 2008 Annual General Meeting 24 April 2008 Announcement of second quarter and half year 2008 results 31 July 2008 Announcement of third quarter and nine months 2008 30 October 2008results DIVIDENDS The record date for the first interim dividend payable on 17 September 2007 (inthe UK, Sweden and the US) was 10 August 2007. Ordinary shares were tradedex-dividend on the London and Stockholm Stock Exchanges from 8 August 2007.ADRs traded ex-dividend on the New York Stock Exchange from the same date. The record date for the second interim dividend for 2007 payable on 17 March2008 (in the UK, Sweden and the US) will be 8 February 2008. Ordinary shareswill trade ex-dividend on the London and Stockholm Stock Exchanges from 6February 2008. ADRs will trade ex-dividend on the New York Stock Exchange fromthe same date. Future dividends will normally be paid as follows: First interim Announced in July and paid in SeptemberSecond interim Announced in January and paid in March TRADEMARKS The following brand names used in this preliminary announcement are trademarksof the AstraZeneca Group of companies: Accolate Arimidex Astra Tech Atacand Casodex Crestor Diprivan EthyolFaslodex FluMist Iressa Losec Merrem Nexium Nolvadex Oxis PlendilPrilosec Pulmicort Pulmicort Respules Rhinocort Seloken Seroquel SeroquelXR Symbicort Symbicort SMART Synagis Tenormin Toprol-XL Zestril ZoladexZomig ADDRESSES FOR CORRESPONDENCE Registrar and Depositary Swedish SecuritiesTransfer Office for ADRs Registered Office Registration CentreThe AstraZeneca Registrar JPMorgan Chase Bank 15 Stanhope Gate VPC ABEquiniti Limited JPMorgan Service Center London PO Box 7822Aspect House PO Box 3408 W1K 1LN SE-103 97 Stockholm Spencer Road South Hackensack UK SwedenLancing NJ 07606-3408West Sussex USBN99 6DAUK Tel (toll free in US): Tel: +44 (0)20 7304 5000 Tel: +46 (0)8 402 9000Tel (freephone in UK): 888 697 80180800 389 1580 Tel: +1 (201) 680 6630Tel (outside UK):+44 (0)121 415 7033 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS In order to utilise the 'safe harbour' provisions of the US Private SecuritiesLitigation Reform Act 1995, we are providing the following cautionary statement:This preliminary announcement contains certain forward-looking statements aboutAstraZeneca. Although we believe our expectations are based on reasonableassumptions, any forward-looking statements may be influenced by factors thatcould cause actual outcomes and results to be materially different from thosepredicted. We identify the forward-looking statements by using the words 'anticipates', 'believes', 'expects', 'intends' and similar expressions in suchstatements. These forward-looking statements are subject to numerous risks anduncertainties. Important factors that could cause actual results to differmaterially from those contained in forward-looking statements, certain of whichare beyond our control, include, among other things: the loss or expiration ofpatents, marketing exclusivity or trade marks; the risk of substantial adverselitigation/government investigation claims and insufficient insurance coverage;exchange rate fluctuations; the risk that R&D will not yield new products thatachieve commercial success; the risk that strategic alliances will beunsuccessful; the impact of competition, price controls and price reductions;taxation risks; the risk of substantial product liability claims; the impact ofany failure by third parties to supply materials or services; the risk offailure to manage a crisis; the risk of delay to new product launches; thedifficulties of obtaining and maintaining regulatory approvals for products; therisk of failure to observe ongoing regulatory oversight; the risk that newproducts do not perform as we expect; the risk of environmental liabilities; therisks associated with conducting business in emerging markets; the risk ofreputational damage; and the risk of product counterfeiting. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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