28th Jul 2005 11:00
AstraZeneca PLC28 July 2005 AstraZeneca PLC Second Quarter and Half Year Results 2005 "Record sales and operating profit in the first half year: year end targetsincreased." Financial HighlightsGroup 2nd Quarter 2nd Quarter Actual CER Half Year Half Year Actual CER 2005 2004 % % 2005 2004 % % $m $m $m $m Sales 6,132 5,288 +16 +13 11,875 10,362 +15 +12 Operating Profit 1,718 1,052 +63 +53 3,171 2,104 +51 +44 Profit before Tax 1,749 1,046 +67 +55 3,235 2,130 +52 +45 Earnings per Share $0.75 $0.48 +55 +40 $1.38 $0.95 +45 +37 All narrative in this section refers to growth rates at constant exchange rates(CER) • Excellent second quarter, with sales up 13 percent and operating profit up 53 percent. • Record first half sales of $11,875 million (up 12 percent) driven by sales of key growth products (up 25 percent). • First half operating profit up 44 percent and operating margin increased to 26.7 percent, benefiting from good cost management and productivity improvements. • Free cash flow of $2,855 million in the first half. Share repurchases totalled $1,182 million year to date; target for the year increased to around $3 billion. • The Board has recommended a 29 percent increase in first interim dividend to $0.38. • NexiumTM sales in the first half increased by 22 percent to $2,259 million. • Sales for CrestorTM were $590 million in the first half, up 72 percent. In the week ending 15 July, CrestorTM share of new prescriptions in the US statin market was 6.2 percent. • SeroquelTM sales were up 37 percent in the first half to $1,300 million. • SymbicortTM sales were up 21 percent in the first half to $502 million. US regulatory submission confirmed for the end of September. • ArimidexTM sales in the first half were $553 million, up 50 percent. Sales in the last twelve months have reached $1,007 million. • Company now anticipates earnings per share above $2.75 for the full year. Sir Tom McKillop, Chief Executive, said: "Strong sales growth and productivitygains have delivered an outstanding first half performance leading to highershareholder returns and an increase in financial targets for the full year." London, 28 July 2005 Interviews with Senior Executives will be available in video, audio and text on:www.astrazeneca.com or www.cantos.com. Pictures are available onwww.newscast.co.uk Broadcast footage of AstraZeneca products and activities isavailable on www.thenewsmarket.com Media Enquiries: Steve Brown/Edel McCaffrey (London) (020) 7304 5033/5034 Staffan Ternby (SodertTMllje) (8) 553 26107 Rachel Bloom (Wilmington) (302) 886 7858 Analyst/Investor Mina Blair/Jonathan Hunt (London) (020) 7304 5084/5087Enquiries: Staffan Ternby (Sodertalje) (8) 553 26107 Ed Seage/Jorgen Winroth (USA) (302) 886 4065/(212) 579 0506 Business Highlights All narrative in this section refers to growth rates atconstant exchange rates (CER) unless otherwise indicated Second Quarter Sales in the second quarter increased 13 percent at CER, or 16 percent on an asreported basis (including a positive exchange benefit of 3 percent). Sales inthe US were up 20 percent. Good sales growth was also achieved in other markets(up 8 percent); sales in Europe were up 8 percent and sales increased 10 percentin Asia Pacific. Global sales of key growth products increased 28 percent. Combined expenditures in R&D and SG&A were 3 percent lower than the secondquarter 2004 (up 1 percent as reported). This spending discipline combined withthe strong sales performance resulted in a 53 percent increase in operatingprofit. Earnings per share in the second quarter were $0.75 versus $0.48 in2004, an increase of 40 percent. NexiumTM sales were $1,204 million in the second quarter, up 33 percent. Salesin the US were up 35 percent versus the second quarter 2004, as a result of goodgrowth in dispensed tablet volume (up 17 percent) as well as destocking in thesecond quarter last year. Sales in other markets were up 28 percent. CrestorTM sales were $317 million in the second quarter. Sales in the US were$184 million, up 63 percent. CrestorTM share of new prescriptions in the USstatin market was 6.2 percent in the week ending 15 July. In other marketssales were up 34 percent, with good growth in France and Italy. Sales of IressaTM were $59 million in the second quarter, with $47 millionaccounted for by sales in Asia Pacific. Sales in the US were down 86 percent.ArimidexTM continues to build upon its market leading position among aromataseinhibitors for the treatment of breast cancer. ArimidexTM sales in the quarterwere up 51 percent, and reached $1,007 million in the last 12 months. SymbicortTM sales were up 17 percent in the second quarter to $255 million.SeroquelTM sales were $667 million, on strong growth in the US (up 34 percent)and in other markets (up 37 percent). First Half For the first half, sales increased 12 percent at CER, or 15 percent on an asreported basis (including a positive exchange benefit of 3 percent). Sales inthe US were up 15 percent and sales in other markets were up 8 percent. Salesfor key growth products were up 25 percent in the first half, on strongperformances for NexiumTM (up 22 percent), SeroquelTM (up 37 percent), CrestorTM(up 72 percent), ArimidexTM (up 50 percent) and SymbicortTM (up 21 percent). Good sales growth combined with lower expenditures in R&D and SG&A (down 3percent at CER, in aggregate) resulted in a 44 percent increase in operatingprofit for the first half. Earnings per share were $1.38 compared with $0.95last year. Future Prospects Following two quarters of robust sales and excellent productivity gains, theCompany now expects to exceed the earnings guidance set at the beginning of theyear. Sales growth is now expected to approach double digits in constantcurrency, and earnings per share is now anticipated to be above $2.75, implyingan operating margin around 27 percent for the full year. This performancecreates a platform for good earnings growth in the following two years. Disclosure Notice: The preceding forward looking statements relating toexpectations for earnings and business prospects for AstraZeneca PLC are subjectto risks and uncertainties, which may cause results to differ materially fromthose set forth in the forward looking statements. These include, but are notlimited to: the rate of growth in sales of generic omeprazole in the US,continued growth in currently marketed products (in particular CrestorTM, NexiumTM, SeroquelTM, SymbicortTM, ArimidexTM, and CasodexTM), the growth in costs andexpenses, interest rate movements, exchange rate fluctuations, and the tax rate. For further details on these and other risks and uncertainties, seeAstraZeneca PLC's Securities and Exchange Commission filings, including the 2004Annual Report on Form 20-F. Sales All narrative in this section refers to growth rates at constant exchange rates(CER) unless otherwise indicated Gastrointestinal Second Quarter CER % Half Year CER % 2005 2004 2005 2004 LosecTM/PrilosecTM 438 531 -21 865 1,071 -22NexiumTM 1,204 891 +33 2,259 1,826 +22Total 1,661 1,439 +13 3,160 2,935 +5 • NexiumTM sales in the US in the second quarter were up 35 percent versus the second quarter of 2004. Dispensed tablet volume increased by 17 percent, well ahead of the US PPI market. The effect of price was neutral. The reported sales growth rate was affected by wholesaler destocking last year and favourable managed care adjustments. NexiumTM share of total prescriptions in the US PPI market was 28.5 percent in June, up 1.6 percentage points since December 2004. NexiumTM is the only leading PPI to increase market share from year-end levels. • First half sales of NexiumTM in the US were up 18 percent, with volume growth of 16 percent. • NexiumTM sales in other markets were up 28 percent for the quarter and the first half. • PrilosecTM sales in the US were down 38 percent in the second quarter and declined 37 percent in the first half. • In other markets, sales of LosecTM were down 16 percent in the second quarter. Sales in Japan were up 23 percent and sales in China were up 28 percent. Cardiovascular Second Quarter CER % Half Year CER % 2005 2004 2005 2004 SelokenTM /Toprol-XLTM 435 320 +34 843 653 +27AtacandTM 254 216 +13 489 425 +10PlendilTM 112 148 -26 205 259 -23ZestrilTM 78 117 -36 165 222 -30CrestorTM 317 207 +50 590 336 +72Total 1,370 1,193 +12 2,627 2,248 +14 • Sales of Toprol-XLTM in the US were up 47 percent in the second quarter and 35 percent for the first half. Reported growth rates in both periods are ahead of estimated demand growth of 30 percent as a result of wholesaler destocking in 2004. • Sales of SelokenTM in other markets were up 7 percent in the second quarter and 10 percent in the first half. • AtacandTM sales in the US were up 16 percent in the second quarter and down 2 percent in the first half. Total prescriptions in the US in the first half were down 8 percent. On 19 May the Company announced that the US FDA has approved a new use for AtacandTM for the treatment of heart failure in patients with left ventricular dysfunction to reduce cardiovascular death and to reduce heart failure hospitalisations. Atacand TM is the first angiotensin receptor blocker (ARB) to provide these benefits with or without an ACE inhibitor and is the only ARB with proven benefit when used with conventional therapy that includes both an ACE inhibitor and a beta blocker. • Sales of AtacandTM in other markets were up 11 percent in the second quarter and 15 percent year to date. • CrestorTM sales in the first half were $590 million, bringing sales for the last 12 months to $1,162 million. Since launch more than 27 million prescriptions have been dispensed to 5 million patients worldwide. • In the US, sales of CrestorTM in the second quarter were up 63 percent to $184 million. Sales in the first half were $338 million, an increase of 83 percent. In the week ending 15 July, CrestorTM share of new prescriptions in the US statin market was 6.2 percent. Market share in the dynamic segment (new and switch patients) was 7.6 percent. • In other markets, CrestorTM sales were $133 million in the second quarter (up 34 percent) on continued strong growth in Europe. Volume share in the statin market is now in double digits in Canada (12.3 percent), the Netherlands (10.5 percent) and most recently, Italy (10.9 percent). Market share in France is 5.4 percent, up another percentage point since the first quarter report. • Sales of PlendilTM in the first half were down 23 percent as a result of the introduction of generic felodipine into the US market in November 2004. First half sales of PlendilTM in the US declined 42 percent. Respiratory Second Quarter CER % Half Year CER % 2005 2004 2005 2004 SymbicortTM 255 205 +17 502 393 +21PulmicortTM 276 244 +11 590 526 +9RhinocortTM 112 100 +10 204 181 +11AccolateTM 13 23 -47 41 53 -25OxisTM 23 26 -16 46 51 -16Total 718 639 +8 1,464 1,287 +10 • SymbicortTM sales in the first half were up 21 percent to $502 million, as the product continues to grow share in the nearly $3 billion per annum market outside the US for fixed combination products for asthma and chronic obstructive pulmonary disease (COPD). • The regulatory filing for SymbicortTM in the US is on track for submission by the end of September 2005. • In May results from the COSMOS trial were presented at the 101st International Conference of the American Thoracic Society, which demonstrated that SymbicortTM Maintenance and Reliever Therapy (formerly Single Inhaler Therapy) reduces the risk of severe asthma attacks by 25 percent (primary endpoint) and the total number of severe asthma attacks by 22 percent, when compared to fluticasone/salmeterol. Results from the COSMOS study will be added to the European regulatory file for SymbicortTM Maintenance and Reliever Therapy, with re-submission planned before the end of 2005. • PulmicortTM sales growth in the first half is a result of strong growth for PulmicortTM RespulesTM in the US (up 31 percent) more than offsetting declines in sales of PulmicortTM TurbuhalerTM worldwide. • Sales for RhinocortTM Aqua in the US were up 26 percent in the first half, as positive variances on stock movements and managed care adjustments more than offset a small decline in total prescriptions. Oncology Second Quarter CER % Half Year CER % 2005 2004 2005 2004 CasodexTM 287 249 +12 564 478 +14ZoladexTM 263 226 +12 494 439 +8ArimidexTM 297 191 +51 553 357 +50IressaTM 59 103 -44 140 196 -31FaslodexTM 35 23 +52 64 49 +29NolvadexTM 32 38 -19 60 69 -16Total 976 834 +14 1,881 1,596 +14 • CasodexTM sales in the US were up 10 percent in the second quarter and the first half on inventory movements and pricing. Total prescription volume was down 2 percent year to date. • CasodexTM sales in other markets were up 13 percent in the second quarter and 15 percent year to date, chiefly on sales growth in Japan (up 19 percent in the first half). • In the US, sales of ArimidexTM were up 79 percent in the second quarter and 72 percent in the first half, as inventory movements and pricing added to the 42 percent increase in total prescriptions for the first half. In the US, ArimidexTM new prescription share for hormonal treatments for breast cancer reached 32 percent in June, up nearly 3 percentage points since the end of last year. • ArimidexTM sales in other markets were up 38 percent in the first half, on good growth in Europe (up 38 percent) and Japan (up 36 percent). • On 28 June the Company announced that ArimidexTM has been granted a new indication-adjuvant treatment of post-menopausal women with hormone receptor positive early invasive breast cancer-from the Medicines and Healthcare Products Regulatory Agency in the UK, leading to further approvals in five other European countries (Austria, Germany, Italy, Portugal and Spain) under the European Mutual Recognition Variation Procedure. • IressaTM sales in the second quarter were $59 million, including $47 million of sales in Asia Pacific (up 5 percent). Sales in Japan were 17 percent lower than second quarter last year. • IressaTM sales in the US were $7 million in the second quarter, 86 percent lower than last year. On 17 June the Company announced a revised label for the US that indicates IressaTM is only to be used in patients who have previously taken IressaTM and who are benefiting or have benefited from IressaTM. To implement the new label as of 15 September 2005 AstraZeneca will initiate the IressaTM Access Program to fill renewal prescriptions for IressaTM through a single mail order pharmacy for patients meeting the criteria set forth by the label. • Sales of FaslodexTM in the first half reached $64 million (up 29 percent) on strong growth in Europe since marketing approval in March of last year. Sales in the US were up 2 percent. Neuroscience Second Quarter CER % Half Year CER % 2005 2004 2005 2004 SeroquelTM 667 488 +35 1,300 936 +37ZomigTM 104 91 +12 172 186 -11Total 1,022 866 +16 1,974 1,678 +15 • SeroquelTM sales in the second quarter were $667 million (up 35 percent) on good growth in the US (up 34 percent) and in Europe (up 62 percent), particularly Germany. • In the US, SeroquelTM sales in the second quarter and the first half increased 34 percent, broadly in line with estimated underlying sales growth of around 30 percent for the year to date. In June, new prescription market share in the US was 28.7 percent, 3.8 percentage points clear of its closest competitor. • In other markets, SeroquelTM sales in the first half were up 44 percent, on sales growth in Europe (up 59 percent) and Canada (up 27 percent). • ZomigTM sales in the US in the second quarter were $46 million (up from $9 million in the first quarter 2005) upon resumption of full responsibility for US commercialisation on 1 April. • Sales of ZomigTM in other markets were up 3 percent in the second quarter and 8 percent in the first half. Geographic Sales Second Quarter CER % Half Year CER % 2005 2004 2005 2004 USA 2,743 2,288 +20 5,243 4,567 +15Europe 2,197 1,928 +8 4,362 3,803 +8Japan 399 376 +6 736 666 +9RoW 793 696 +9 1,534 1,326 +10 • Sales in the US in the second quarter were fuelled by strong growth for NexiumTM, SeroquelTM, Toprol-XLTM, CrestorTM, and ArimidexTM, which more than offset declines in sales of patent-expired products and of Iressa TM. • Sales growth in Europe in the second quarter was driven by NexiumTM (up 27 percent), Oncology products (up 22 percent), SeroquelTM (up 62 percent), SymbicortTM (up 12 percent) and CrestorTM (up 32 percent). • Second quarter sales in Japan reflect good growth in LosecTM (up 23 percent), ZoladexTM (up 17 percent), CasodexTM (up 18 percent) and ArimidexTM (up 33 percent). • Sales in China increased 38 percent in the first half to $135 million, on good growth in LosecTM and the anaesthetic products combined with the launch of IressaTM. Operating Review All narrative in this section refers to growth rates at constant exchange rates(CER) unless otherwise indicated Second Quarter Reported sales increased by 16 percent and operating profit by 63 percent. Atconstant exchange rates sales increased by 13 percent and operating profit by 53percent. Reported US sales growth in the second quarter of 20 percent compares tounderlying growth of 17 percent after adjusting for inventory movements andquarterly managed care accruals. For the six months underlying US growth ratesapproximate to reported rates although variances arise at the individual productlevels. Fee for service contracts are now in place with the majority of USwholesalers. Currency benefited reported sales by 3 percent and operating profit by 10percent. In comparison to the second quarter last year, the dollar was weakeragainst the euro (4 percent), benefiting sales, and also against the Swedishkrona (4 percent) and sterling (3 percent), increasing costs. These currencymovements, together with hedging benefits, increased earnings per share by 6cents for the quarter. Reported operating margin increased by 8.1 percentage points from 19.9 percentto 28.0 percent. Currency benefited margin by 1.0 percentage points, implyingan underlying margin improvement of 7.1 percentage points. Gross margin increased by 2.3 percentage points to 78.6 percent of sales.Currency benefited gross margin by 1.3 percentage points. Payments to Merck at5.0 percent of sales were 0.2 percentage points higher than the second quarterlast year, implying an underlying increase to margin of 1.2 percentage pointsresulting from improved product mix and ongoing operating efficiencies. In aggregate, R&D and SG&A expenses of $3,089 million declined 3 percentcompared to last year as disciplined expenditure management and productivityimprovements continue throughout the organization. In comparison to secondquarter last year R&D and SG&A combined added 7.9 percentage points to operatingmargin. R&D expenditures decreased by 9 percent against a high comparativequarter and through a reduction in the level of external spend on manpower andcontract research organization costs. SG&A cost growth was held flat mostly dueto lower promotional spend as product launch costs have peaked. SG&A includes acharge of $75 million in respect of the fine levied by the European Commissionfor alleged LosecTM abuse of dominant position (which will be appealed). Lower other income reduced margin by 1.8 percentage points due principally tothe gain on disposal of the Durascan business last year. The fair value adjustments relating to financial instruments were $2 million inquarter two, comprising a $6 million benefit in cost of sales, a $7 millioncharge to interest and a $3 million benefit to R&D. First Half Reported sales increased by 15 percent and operating profit by 51 percent. Atconstant exchange rates sales increased by 12 percent and operating profit by 44percent. Currency benefited reported sales by 3 percent and operating profit by 7percent. As a result of the recent strengthening of the dollar, currentexchange rates would suggest approximately half of the 7 cent EPS benefitrealized to date will reverse in the second half of the year. Operating margin increased by 6.4 percent from 20.3 percent to 26.7 percent.Underlying margin improvement was 6.0 percentage points for the half year withcurrency benefiting margin by 0.4 percentage points. Gross margin increased by 0.3 percentage points to 77.1 percent of sales. Lowerpayments to Merck (4.7 percent of sales) and currency benefited gross margin by0.1 and 0.7 percentage points respectively. The resulting underlying decline of0.5 percent is mostly attributable to fair value adjustments of exchangecontracts and the costs of the termination of the Medpointe ZomigTM distributionagreement in the US in the first quarter. Cumulatively, R&D and SG&A expenses declined by 3 percent (1 percent actualgrowth) compared to the same period last year. The combined decline in R&D andSG&A added 7.3 percentage points to operating margin, with 2.7 percentage pointsfrom R&D and 4.6 percentage points from SG&A. Lower other income reduced margin by 0.9 percentage points due principally tothe gain on disposal of the Durascan business in the first half of last year. Fair value adjustments relating to financial instruments and impairmentsamounted to a $43 million charge for the half year, with $17 million charged tocost of sales, $7 million charged to interest and $19 million charged to R&D. Interest and Dividend Income Net interest and dividend income for the first half was $64 million (2004, $26million), with $31 million in the second quarter (2004, $6 million expense). Theincrease over second quarter last year is primarily attributable to the higheraverage investment balances and yields. The reported amounts include netinterest income of $11 million in the first half and $6 million in the secondquarter arising from employee benefit fund assets and liabilities as required byIAS 19 together with a charge to interest in the first half of $7 million and $7million in the second quarter related to fair value adjustments on bonds andinterest rate swaps. Taxation The effective tax rate for the half year was 29.9 percent (2004, 24.2 percent).The increase is due to a different geographical mix of profits and no relief inrespect of the LosecTM fine. 2004 also benefited from a one-off reduction inthe deferred tax liability in relation to rolled over gains following agreementswith the relevant tax authorities. For the full year the rate is anticipated tobe around 29.0 percent. Cash Flow Cash generated from operating activities was $3.2 billion, $1.5 billion higherthan in the first half of 2004. Higher operating profits and a reduction inworking capital of $131 million were the main drivers of this, offset by anincrease in tax paid to $810 million. Cash inflows from investing activities of $477 million in the half year comparewith $78 million outflows in the equivalent period in 2004. The change isprimarily as a result of short-term management of funds on deposit - inflows inthe first half of $776 million compare with inflows of $443 million in the firsthalf of 2004. Expenditure on property, plant and equipment fell by $172 millionto $411 million. Free cash flow (which represents net cash flows before financing activities, asadjusted for movements in short term deposits) for the period was $2,855million, an increase of $1,693 million. After accounting for net sharerepurchases of $1,148 million, the $1,079 million dividend payment toshareholders and foreign exchange effects, there is a $1,386 million increase incash and cash equivalents. Net cash funds at 30 June 2005 of $4,536 million were $571 million higher than31 December 2004. Dividends The Board has recommended a 29 percent increase in the first interim dividend to$0.38 (21.9 pence, SEK 2.99) to be paid on 19 September 2005 to all shareholderson the register on 12 August 2005. Share Repurchase Programme During the second quarter 16.6 million shares were repurchased for cancellationat a total cost of $701 million bringing the total repurchases for the firsthalf of the year to 28.5 million shares at a total cost of $1,182 million. Aspreviously indicated it is intended that free cash flow will be fullydistributed; it is currently anticipated that share repurchases for the fullyear will now increase to around $3 billion. The total number of shares in issue at 30 June 2005 is 1,617 million. Updated R&D Pipeline Table An updated R&D pipeline table is available on the Company's website,www.astrazeneca.com, under information for investors. Summaries of results ofcompleted clinical trials can now be found on www.astrazenecaclinicaltrials.comand details of new or ongoing hypothesis-testing studies will also be accessiblethrough this site in compliance with the global industry position on disclosureof information. Key pipeline news include confirmation of a September US filing for SymbicortTMpMDI for asthma, the filing target for SeroquelTM in bipolar depression beingbrought forward to around the end of this year, and the movement of ZactimaTM(AZD6474) into Phase III for treatment of solid tumours. The unexpectedpreclinical finding in RET mutation has now translated into positive clinicaldata in the rare medullary cell cancer of the thyroid. A decision has been taken to move the filing for CeroviveTM (stroke) to 2007 toallow for an increase in the size of the pivotal SAINT II trial. AZD0865(acid-related disorders) and AZD8129 (depression/anxiety) have been withdrawnfrom development following review of Phase II data. The anti-arrhythmic AZD7009intravenous Phase II programme continues but oral studies are on hold pending areview of non-cardiac side effects observed in the Phase II studies. Other changes are listed in the R&D pipeline table. Calendar 8 September 2005 Discovery presentation by Jan Lundberg (London) 27 October 2005 Announcement of third quarter and nine months results Q4 2005 (Date TBD) Education seminar on Merck payments 2 February 2006 Announcement of fourth quarter and full year results 2005 Sir Tom McKillop Chief Executive This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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