26th Jul 2007 11:00
AstraZeneca PLC26 July 2007 Consolidated Income Statement 2007 2006For the six months ended 30 June $m $m Sales 14,239 12,805 Cost of sales (3,154) (2,642)Distribution costs (122) (112)Research and development (2,395) (1,816)Selling, general and administrative costs (4,822) (4,405)Other operating income and expense 397 277 Operating profit 4,143 4,107 Finance income 486 400Finance expense (371) (254) Profit before tax 4,258 4,253Taxation (1,257) (1,227) Profit for the period 3,001 3,026 Attributable to: Equity holders of the Company 2,986 3,024 Minority interests 15 2 3,001 3,026 Basic earnings per $0.25 Ordinary Share $1.97 $1.92Diluted earnings per $0.25 Ordinary Share $1.97 $1.91 Weighted average number of Ordinary Shares in issue (millions) 1,515 1,577Diluted average number of Ordinary Shares in issue (millions) 1,518 1,581 Dividends declared in the period 1,885 1,453 Consolidated Income Statement 2007 2006For the quarter ended 30 June $m $m Sales 7,273 6,625 Cost of sales (1,668) (1,391)Distribution costs (61) (58)Research and development (1,225) (955)Selling, general and administrative costs (2,605) (2,290)Other operating income and expense 259 200 Operating profit 1,973 2,131 Finance income 239 199Finance expense (221) (121) Profit before tax 1,991 2,209Taxation (554) (607) Profit for the period 1,437 1,602 Attributable to: Equity holders of the Company 1,426 1,599Minority interests 11 3 1,437 1,602 Basic earnings per $0.25 Ordinary Share $0.95 $1.02Diluted earnings per $0.25 Ordinary Share $0.95 $1.01 Weighted average number of Ordinary Shares in issue (millions) 1,503 1,575Diluted average number of Ordinary Shares in issue (millions) 1,506 1,580 Consolidated Balance Sheet As at As at 31 As at 30 June December 30 June 2007 2006 2006 $m $m $m ASSETS Non-current assets Property, plant and equipment 8,161 7,453 7,269Intangible assets, including goodwill 21,421 4,204 4,609Other investments 604 119 125Deferred tax assets 1,336 1,220 1,405 31,522 12,996 13,408 Current assets Inventories 2,563 2,250 2,211Trade and other receivables 6,260 5,561 5,471Other investments 360 657 1,020Income tax receivable 1,944 1,365 273Cash and cash equivalents 4,951 7,103 6,076 16,078 16,936 15,051Total assets 47,600 29,932 28,459 LIABILITIES Current liabilitiesInterest bearing loans and borrowings (14,342) (136) (85)Trade and other payables (7,179) (6,334) (6,572)Income tax payable (3,412) (2,977) (1,748) (24,933) (9,447) (8,405)Non-current liabilities Interest bearing loans and borrowings (1,057) (1,087) (1,046)Deferred tax liabilities (4,235) (1,559) (1,775)Retirement benefit obligations (1,541) (1,842) (1,582)Provisions (633) (327) (317) Other payables (234) (254) (325) (7,700) (5,069) (5,045)Total liabilities (32,633) (14,516) (13,450)Net assets 14,967 15,416 15,009 EQUITY Capital and reserves attributable to equity holders ofthe Company Share capital 374 383 392Share premium account 1,799 1,671 1,433Other reserves 1,911 1,902 1,851Retained earnings 10,763 11,348 11,234 14,847 15,304 14,910Minority equity interests 120 112 99 Total equity 14,967 15,416 15,009 Consolidated Cash Flow Statement For the six months ended 30 June 2007 2006 $m $mCash flows from operating activities Profit before taxation 4,258 4,253Finance income and expense (115) (146)Depreciation, amortisation and impairment 739 588Increase in working capital (589) (352)Other non-cash movements 427 115Cash generated from operations 4,720 4,458 Interest paid (61) (30) Tax paid (1,475) (1,007) Net cash inflow from operating activities 3,184 3,421 Cash flows from investing activities Acquisition of businesses* (14,543) (213)Movement in short term investments and fixed deposits* 572 701Purchase of property, plant and equipment (487) (373)Disposal of property, plant and equipment 27 16Purchase of intangible assets (268) (331)Purchase of non-current asset investments (6) (15)Disposal of non-current asset investments - 54Interest received 221 154Dividends paid by subsidiaries to minority interest (9) (4) Net cash outflow from investing activities (14,493) (11) Net cash (outflow)/inflow before financing activities* (11,309) 3,410 Cash flows from financing activities Proceeds from issue of share capital 128 746Repurchase of shares (2,160) (1,627)Dividends paid (1,878) (1,442)Repayment of loans (838) -Movement in short term borrowings 13,913 - Net cash inflow/(outflow) from financing activities 9,165 (2,323) Net (decrease)/increase in cash and cash equivalents in the (2,144) 1,087period Cash and cash equivalents at the beginning of the period 6,989 4,895Exchange rate effects 26 16 Cash and cash equivalents at the end of the period 4,871 5,998 Cash and cash equivalents consists of: Cash and cash equivalents 4,951 6,076Overdrafts (80) (78) 4,871 5,998 Note: Free Cash Flow (*) of $2,662 million (2006: $2,922 million) is calculatedas; net cash (outflow)/inflow before financing activities, adjusted for:acquisition of businesses, movements in short term investments and fixeddeposits. Consolidated Statement of Recognised Income and Expense 2007 2006For the six months ended 30 June $m $m Profit for the period 3,001 3,026Foreign exchange adjustments on consolidation 149 454Available for sale losses taken to equity (14) (20)Actuarial gains for the period 352 119Tax on items taken directly to reserves (90) 23 397 576 Total recognised income and expense for the period 3,398 3,602 Attributable to: Equity holders of the Company 3,390 3,597Minority interests 8 5 3,398 3,602 Independent review report to AstraZeneca PLC Introduction We have been instructed by the Company to review the financial informationcomprising the consolidated income statement, balance sheet, cash flow statementand statement of recognised income and expense for the six months ended and asat 30 June 2007 and notes 1 to 5 (set out on pages 17, 19, 20, 21 and 23 to 29respectively). We have read the other information contained in the interimreport and considered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the Company in accordance with the terms of ourengagement to assist the Company in meeting the requirements of the ListingRules of the Financial Services Authority. Our review has been undertaken sothat we might state to the Company those matters we are required to state to itin this report and for no other purpose. To the fullest extent permitted by law,we do not accept or assume responsibility to anyone other than the Company forour review work, for this report, or for the conclusions we have reached. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the Directors. The Directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual Financial Statements exceptwhere any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4- Review of interim financial information issued by the Auditing Practices Boardfor use in the UK. A review consists principally of making enquiries of groupmanagement and applying analytical procedures to the financial information andunderlying financial data and, based thereon, assessing whether the accountingpolicies and presentation have been consistently applied unless otherwisedisclosed. A review excludes audit procedures such as tests of controls andverification of assets, liabilities and transactions. It is substantially lessin scope than an audit performed in accordance with International Standards onAuditing (UK and Ireland) and therefore provides a lower level of assurance thanan audit. Accordingly, we do not express an audit opinion on the financialinformation. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2007. KPMG Audit PlcChartered Accountants8 Salisbury Square, London 26 July 2007 Notes to the Interim Financial Statements 1 BASIS OF PREPARATION AND ACCOUNTING POLICIES The unaudited financial statements for the six months ended 30 June 2007 havebeen prepared in accordance with International Accounting Standards andInternational Financial Reporting Standards (collectively "IFRS") as adopted bythe European Union (EU). Details of the accounting policies applied are thoseset out in AstraZeneca PLC's Annual Report and Form 20-F Information 2006.These condensed consolidated interim financial statements have been prepared inaccordance with International Financial Reporting Standard (IFRS) IAS 34 -Interim Financial Reporting. They do not include all of the informationrequired for full annual financial statements, and should be read in conjunctionwith the consolidated financial statements of the Group as at and for the yearended 31 December 2006. 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. These interim financial statements do not constitute statutory accounts of theGroup within the meaning of Section 240 of the Companies Act 1985. Statutoryaccounts for the year ended 31 December 2006 have been filed with the Registrarof Companies. The auditors' report on those accounts was unqualified and didnot contain any statement under Section 237 of the Companies Act 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. At 1 Jan Cash Acquisitions Non-cash Exchange At 30 June 2007 flow movements movements 2007 $m $m $m $m $m $m Loans due after 1 year (1,087) - - 30 - (1,057) Current instalments of - 838 (1,165) - - (327)loans Total loans (1,087) 838 (1,165) 30 - (1,384) Other investments - 657 (572) 279 (6) 2 360currentCash and cash equivalents 7,103 (2,178) - - 26 4,951Overdrafts (114) 34 - - - (80)Short term borrowings (22) (13,913) - - - (13,935) 7,624 (16,629) 279 (6) 28 (8,704) Net funds/(debt) 6,537 (15,791) (886) 24 28 (10,088) 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 to be 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 $24 million of turnover in the month sinceacquisition. After amortisation, net investments/interest costs (includinginterest costs of external financing of $52 million) and tax, the lossattributable to the MedImmune acquisition was $91 million. If the acquisitionhad taken effect at the beginning of the reporting period (1 January 2007), on aproforma basis the revenue, profit before tax and profit after tax of thecombined Group for the six month period would have been $14,807 million, $3,851million and $2,725 million, respectively. Basic and diluted Earnings per Sharefor the combined Group would have been $1.80. 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 8,136 8,329Property, plant and equipment 523 70 593Other 550 (17) 533 1,266 8,189 9,455Current 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 (2,787) (2,473) (924) (2,787) (3,711) Total assets acquired 1,455 3,832 5,287 Goodwill 8,596 Total consideration for outstanding shares* 13,883Additional payments related to convertibledebt, share options and other acquisitionobligations 1,770 Less: amounts paid after 30 June 2007 (283)Less: cash acquired (979) Net cash outflow 14,391 * The total consideration for outstanding shares includes $29m of directly attributable costs. 4 RESTRUCTURING COSTS Profit before tax for the six months ended 30 June 2007 is stated after chargingrestructuring costs of $458 million in the six month period. These have beencharged to the income statement as follows: $mCost of Sales 281R&D 29SG&A 148Total 458 5 LEGAL PROCEEDINGS and contingent liabilities AstraZeneca (including the recently acquired MedImmune, Inc.) is involved invarious legal proceedings considered typical to its businesses, includinglitigation relating to employment matters, product liability, commercialdisputes, infringement of intellectual property rights, the validity of certainpatents and securities law. The matters discussed below constitute the moresignificant developments since the Form 20-F filing in respect of the fiscalyear ended 31 December 2006 as filed with the SEC on 27 March 2007 and should beread in conjunction with the financial statements included therein. Unless noted otherwise, no provisions have been established in respect of theclaims discussed below. Matters previously disclosed in respect of the first quarter of 2007 and April2007 Seroquel(TM)(quetiapine fumarate) In March 2007, AstraZeneca received a notice from Sandoz, Inc. that Sandoz hadsubmitted an Abbreviated New Drug Application (ANDA) for quetiapine fumarate25mg tablets. AstraZeneca's patent covering Seroquel(TM)tablets is listed in theFDA's Orange Book. The Sandoz notice contained a Paragraph IV certificationalleging non-infringement and patent invalidity in respect of AstraZeneca'slisted patent covering Seroquel(TM). Sandoz is the second generic drugmanufacturer to submit an ANDA containing a Paragraph IV certification andseeking approval to market a 25mg quetiapine fumarate tablet. As disclosed inNovember 2005, Teva Pharmaceuticals USA submitted the first ANDA seekingapproval to market 25mg quetiapine fumarate tablets and notifying AstraZeneca ofan ANDA submission to the FDA containing a Paragraph IV certification. InFebruary 2006, Teva supplemented its ANDA to seek approval to market 100, 200and 300mg quetiapine fumarate tablets. In April 2007, AstraZeneca filed a patent infringement lawsuit in the U.S.Federal District Court, District of New Jersey, against Sandoz for patentinfringement in respect of its 25mg ANDA product. Currently pending in the U.S.Federal District Court, District of New Jersey, is AstraZeneca's consolidatedANDA patent infringement action relating to Teva's ANDA for 25, 100, 200 and300mg quetiapine fumarate tablets. In January 2007, Teva sought leave to amend its responsive pleadings inAstraZeneca's consolidated lawsuit against Teva to add allegations, defences andcounter-claims directed to AstraZeneca's alleged inequitable conduct in theprocurement of its patent. AstraZeneca did not object to the Court grantingleave to amend and, in March 2007, the Court allowed Teva to amend itspleadings. Later, in March 2007, AstraZeneca filed a responsive pleading denyingor contesting Teva's amended pleadings. Government Investigation AstraZeneca, along with several other manufacturers, has received a letter fromthe Committee on Oversight and Government Reform of the U.S. House ofRepresentatives as part of the Committee's ongoing oversight of thepharmaceutical industry's research and marketing practices. The Committee hasrequested that AstraZeneca provide clinical and marketing information relatingto Seroquel(TM). AstraZeneca is co-operating with the Committee's enquiry. Crestor(TM)(rosuvastatin) As previously disclosed, AstraZeneca Pharmaceuticals LP and/or AstraZeneca LP inthe US were served with seven individual lawsuits in 2004 and 2005 involvingalleged injury in association with the use of Crestor(TM). Five of these lawsuitshave now been dismissed. In addition, a motion for authorisation to institute aclass action and to be a representative was filed in Quebec, Canada againstAstraZeneca PLC and AstraZeneca Canada Inc., in which the petitioner allegedinjury as a result of the use of Crestor(TM). This matter was dismissed in March2007. During 2006, AstraZeneca was served with six additional individuallawsuits in the US, all of which have since been dismissed. AstraZeneca isvigorously defending all the remaining actions. Matters disclosed in respect of the second quarter of 2007 and July 2007 Atacand(TM)(candesartan cilexetil) In April 2007, AstraZeneca (NDA holder) and Takeda (patent holder) receivednotice from Sandoz Inc. that Sandoz had filed an ANDA with the FDA, seekingapproval to market a generic version of Atacand(TM)(candesartan cilexetil) in the4, 8, 16 and 32 mg doses, prior to the expiration in July 2013 of US Patent No.5534534 (the '534 Patent). The notification claims that the Sandoz product doesnot infringe the '534 Patent. Sandoz did not challenge the compound patentslisted in the FDA Orange Book with reference to AtacandTM, the latter of whichexpires in June 2012. As a result Sandoz cannot market candesartan cilexetiluntil the end of the exclusivity period afforded by these patents. AstraZenecaand Takeda have decided not to bring an action for patent infringement at thistime. LosecTM/Prilosec(TM)(omeprazole) In May 2007, the United States District Court for the Southern District of NewYork upheld both AstraZeneca formulation patents covering PrilosecTM(omeprazole), a ruling consistent with the previously disclosed decision in thefirst wave case in October 2002. The Court found that the generic omeprazoleformulations of Impax Laboratories Inc. and Apotex (Apotex Corp. and ApotexInc.) infringed both patents in suit. AstraZeneca is seeking appropriaterelief, including damages. The Court also found that the generic omeprazoleproducts sold by Lek Pharmaceutical and Chemical Company d.d. and MylanPharmaceuticals Inc./Esteve did not infringe. AstraZeneca has appealed theMylan/Esteve decision to the US Court of Appeals for the Federal Circuit. In June 2007, AstraZeneca received a notice from Dr. Reddy's Laboratories, Ltd.and from Dr. Reddy's Laboratories, Inc. (Dr. Reddy's) that Dr. Reddy's hadsubmitted an ANDA seeking FDA approval to market a 20mg delayed releaseomeprazole magnesium capsule for the over-the-counter (OTC) market. Dr. Reddy'sseeks approval to market a generic omeprazole OTC product before the expirationof the patents listed in the FDA Orange Book in reference to the Prilosec(TM)OTCproduct that is marketed by Procter & Gamble. AstraZeneca is evaluating Dr.Reddy's notice. Nexium(TM)(esomeprazole magnesium) On 13 June 2007, Florida's appellate court affirmed the dismissal of thepreviously disclosed Nexium(TM)consumer litigation pending in Florida. Theplaintiff has filed a petition in the Florida Supreme Court for discretionaryreview. The European patent protecting the formulation of the Nexium(TM)MUPS product isunder oppostition with the European Patent Office (EPO) and an OppositionDivision oral hearing is scheduled for November 2007. The patent is opposed bythe generic companies ratiopharm, Hexal, Teva and Krka. Nolvadex(TM)(tamoxifen) As previously disclosed, since 2000, AstraZeneca has been a co-defendant withBarr Laboratories in numerous purported class actions filed in federal and statecourts throughout the United States in which the plaintiffs alleged that theypaid "supra-competitive and monopolistic prices" for tamoxifen as a result ofthe settlement of patent litigation between Zeneca and Barr in 1993. All of thestate court actions were removed to federal court and were consolidated, alongwith all of the cases originally filed in the federal courts, in a federalmulti-district litigation proceeding pending in the US District Court for theEastern District of New York. In May 2003, the US District Court for theEastern District of New York granted AstraZeneca's motion to dismiss. InNovember 2005, the US Court of Appeals for the Second Circuit affirmed theDistrict Court's decision. The plaintiffs thereafter filed a writ of certiorariwith the United States Supreme Court to request that the Court hear an appeal ofthe Second Circuit's decision. In June 2007, the US Supreme Court denied thePlaintiffs' writ. Seroquel(TM)(quetiapine fumarate) As previously disclosed, AstraZeneca Pharmaceuticals LP, either alone or inconjunction with one or more affliliates, has been sued in numerous individualpersonal injury actions involving Seroquel(TM). In the overwhelming majority ofthese cases, the nature of the plaintiffs' alleged injuries is not clear.Although some plaintiffs contend that they developed diabetes and/or otherrelated injuries as a result of taking Seroquel(TM)and/or other atypicalanti-psychotic medications; in most instances, little or no factual informationregarding the alleged injury has been provided. As of 26 June 2007, AstraZeneca was defending 5,839 served or answered lawsuitsinvolving approximately 10,000 plaintiff groups. To date, about 645 cases havebeen dismissed. Discovery directed to all parties is ongoing in the SeroquelTMcases. AstraZeneca intends to vigorously defend all these Seroquel(TM)cases. As referred to above, patent litigation concerning Teva Pharmaceuticals USA'scurrently pending ANDA, which seeks FDA approval to market generic 25, 100, 200and 300 mg quetiapine fumarate tablets, is proceeding in US Federal DistrictCourt, District of New Jersey. In June 2007, AstraZeneca received a Paragraph IVcertification notice from Teva that it had supplemented its currently pendingANDA with a request for FDA approval to additionally market generic 50, 150 and400 mg quetiapine fumarate tablets. In June 2007, AstraZeneca filed a patentinfringement lawsuit in respect of Teva's ANDA supplementation for 50, 150 and400 mg tablets in US Federal District Court, District of New Jersey. In July2007, Teva filed a responsive pleading including counterclaims for declaratoryjudgements of invalidity and unenforceability due to alleged inequitableconduct. In May 2007, Sandoz, Inc. filed responsive pleadings in AstraZeneca's patentinfringement action in respect of Sandoz's 25 mg quetiapine fumarate tablets. InJune 2007, AstraZeneca filed its reply pleadings answering Sandoz'scounterclaims. In May 2007, the New Jersey Ironworkers Local Union No. 68 filed a class actionsuit against AstraZeneca on behalf of all individuals and non-governmentalentities that paid for Seroquel(TM)from January 2000 to date. The lawsuit isfiled in the Federal District Court in New Jersey and alleges that AstraZenecapromoted Seroquel(TM)for off-label uses and misled class members into believingthat Seroquel(TM)was superior to other, lower-cost alternative medicines. Twosimilar class action lawsuits were filed in June in New Jersey and PennsylvaniaFederal Courts. The Company believes these suits to be without merit andintends to vigorously defend the claims. 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 antipsychotics 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 programmes forprescriptions written as a result of the alleged off-label promotion. Althoughno other similar lawsuits have been brought by states other than Pennsylvania,the Company has been informed that the Attorney General's Offices of multipleother states have investigations looking into similar Seroquel(TM)off-labelissues. AstraZeneca has signed agreements with the states of South Carolina andOhio tolling the statutes of limitations on potential claims, and has beenapproached by additional states for similar tolling agreements. The Companybelieves these claims to be without merit and intends to vigorously defend thePennsylvania lawsuit. Symbicort(TM)(budesonide/formoterol) As previously disclosed, in March 2005 the EPO ruled that the European patentcovering the combination of formoterol and budesonide in Symbicort(TM)is valid.This ruling was appealed by Norton Healthcare Ltd, Miat Spa, Generics (UK) Ltdand Liconsa SA. A Board of Appeal hearing is scheduled for October 2007. Toprol-XL(TM)(metoprolol succinate) In July 2007, the Court of Appeals for the Federal Circuit responded toAstraZeneca's appeal of the January 2006 ruling from the US District court forthe Eastern District of Missouri. The appeals court reversed the DistrictCourt's finding that the patents were unenforceable due to inequitable conduct,finding that the District Court erred in finding inequitable conduct on summaryjudgment where there were material facts in dispute. However, the Federalcircuit, in a 2-1 decision, affirmed the District Court's finding of invalidityof the '154 patent due to double patenting. AstraZeneca is considering whetherto request reconsideration of the holding of invalidity by the Federal Circuiten banc. In June 2007, AstraZeneca received a notice from Dr. Reddy's that it hadsubmitted an ANDA to the US FDA for metoprolol succinate extended-releasetablets, 100mg and 200mg (KV Pharmaceuticals previously submitted an ANDA onthe same dose forms which has received final approval by FDA). Dr. Reddy's isseeking FDA approval to market a generic metoprolol succinate product prior tothe expiration of some but not all of the patents listed in the FDA Orange Bookin reference to Toprol-XL(TM). AstraZeneca is currently evaluating Dr. Reddy'sANDA to determine whether or not to file a complaint for patent infringement. Dr. Reddy's notice did not challenge the '154 patent. AstraZeneca'sexclusivity relating to this patent expires in March 2008, unless it isterminated earlier as a result of the outcome of the above-referenced appeal.Because AstraZeneca has not received notice from Dr. Reddy's as to this USpatent, Dr. Reddy's cannot market generic metoprolol succinate until the end ofthe exclusivity afforded this patent. AstraZeneca reserves the right to enforceall patents related to Toprol-XL(TM). Zestril(TM)(lisinopril) As previously disclosed, AstraZeneca and Merck were involved in a patentinfringement action in the Federal Court of Canada against Apotex Inc. regardinginfringement of Merck's lisinopril patent. In April 2006 the Federal Court ofCanada ruled in favour of AstraZeneca and Merck on the key issues, and thisdecision was upheld by the Federal Court of Appeal in Canada in October 2006,dismissing Apotex's appeal. In December 2006 Apotex sought leave to appeal to the Supreme Court of Canada.The Supreme Court of Canada dismissed Apotex's leave to appeal in May 2007. Average wholesale price class action litigation As previously disclosed, the District Court in Boston 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: (Class1) a 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 Zoladex(TM)(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. Aseparate jury trial against AstraZeneca only, involving the Class 1 claims, wasscheduled to begin in June 2007. However, in May 2007, the parties reached aproposed settlement agreement resolving the Class 1 claims. The settlement, ifapproved 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.Provisions in respect of these costs have been made. In June 2007, the Court issued its decision on Classes 2 and 3. The Court foundAstraZeneca liable under the Massachusetts consumer protection statute forengaging in unfair and deceptive conduct in connection with the pricing ofZoladex(TM)during the period 1998 through 2003. The Court awarded damagesagainst AstraZeneca of $4.5 million on Class 3, and requested additionalinformation from plaintiffs before awarding damages on Class 2. Damages onClass 2 are likely to be in the region of $2.2 million. AstraZeneca believesthe decision to be in error and intends to appeal. Separately, MedImmune is also involved in various lawsuits brought by variousstates and counties in the United States alleging manipulation of averagewholesale prices by several defendants, including MedImmune. These weredisclosed as part of MedImmune's Annual Report on Form 10-K for the fiscal yearended 31 December 2006 filed with the U.S. Securities and Exchange Commission.During the first half of 2007, there were no material changes to the status ofthese lawsuits, except that in April 2007 MedImmune was served with a complaintfiled by the County of Orange, New York. Taxation As previously disclosed in the Annual Report and Form 20-F Information 2006, theinternational tax environment presents increasingly challenging dynamics interms of transfer pricing dispute settlements. Our balance sheet positions fortransfer pricing matters reflect appropriate corresponding relief in theterritories affected. Management considers that at present such correspondingrelief will be available but given the challenges in the international taxenvironment, will keep this aspect under careful review. 6 HALF YEAR TERRITORIAL SALES ANALYSIS % Growth 1st Half 1st Half Actual Constant 2007 2006 Currency $m $m US 6,502 5,959 9 9 Canada 528 513 3 2 North America 7,030 6,472 9 9 Western Europe 4,462 3,998 12 3 Japan 734 691 6 10 Other Established ROW 310 252 23 13 Established ROW* 5,506 4,941 11 4 Emerging Europe 494 429 15 9 China 201 156 29 25 Emerging Asia Pacific 356 308 16 10 Other Emerging ROW 652 499 31 27 Emerging ROW 1,703 1,392 22 17 Total Sales 14,239 12,805 11 8 * Established ROW comprises Western Europe (including France, UK, Germany,Italy, Sweden and others), Japan, Australia and New Zealand. 7 SECOND QUARTER TERRITORIAL SALES ANALYSIS % Growth 2nd Quarter 2nd Quarter Actual Constant 2007 2006 Currency $m $m US 3,268 3,077 6 6 Canada 274 263 4 2 North America 3,542 3,340 6 6 Western Europe 2,262 2,064 10 1 Japan 403 387 4 8 Other Established ROW 177 135 31 18 Established ROW* 2,842 2,586 10 3 Emerging Europe 248 191 30 19 China 109 84 30 25 Emerging Asia Pacific 187 159 18 13 Other Emerging ROW 345 265 30 26 Emerging ROW 889 699 27 21 Total Sales 7,273 6,625 10 6 * Established ROW comprises Western Europe (including France, UK, Germany, Italy, Sweden and others), Japan, Australia and New Zealand. 8 HALF YEAR PRODUCT SALES ANALYSIS World US 1st 1st Actual Constant 1st Actual Half Half Growth Currency Half Growth 2007 2006 Growth 2007 $m $m % % $m % Gastrointestinal: Nexium 2,620 2,472 6 4 1,717 4Losec/Prilosec 577 700 (18) (20) 114 14Others 40 33 21 15 13 160 Total Gastrointestinal 3,237 3,205 1 (1) 1,844 5 Cardiovascular: Crestor 1,306 867 51 47 696 42Seloken/Toprol-XL 901 934 (4) (5) 670 (8)Atacand 614 530 16 10 128 5Tenormin 151 161 (6) (9) 10 (23)Zestril 156 153 2 (3) 13 -Plendil 139 142 (2) (7) 20 67Others 141 143 (1) (7) 1 (50) Total Cardiovascular 3,408 2,930 16 13 1,538 11 Respiratory: Symbicort 768 585 31 22 30 n/mPulmicort 721 629 15 12 473 19Rhinocort 187 187 - (2) 125 (5)Oxis 46 44 5 (2) - -Accolate 38 39 (3) (3) 28 4Synagis 16 - n/m n/m 2 n/mFluMist - - - - - -Others 82 72 14 7 - - Total Respiratory 1,858 1,556 19 14 658 18 Oncology: Arimidex 831 714 16 12 340 20Casodex 641 580 11 7 148 6Zoladex 524 481 9 5 45 (13)Iressa 113 112 1 2 5 (38)Ethyol 8 - n/m n/m 8 n/mOthers 174 142 23 20 80 51 Total Oncology 2,291 2,029 13 9 626 17 Neuroscience: Seroquel 1,886 1,656 14 12 1,333 10Local anaesthetics 269 272 (1) (6) 22 (55)Zomig 213 196 9 5 89 3Diprivan 125 161 (22) (25) 19 (63)Others 27 29 (7) (10) 6 (25) Total Neuroscience 2,520 2,314 9 6 1,469 5 Infection and Other:Merrem 372 284 31 24 70 37Other Products 140 133 5 (2) 70 9 Total Infection and Other 512 417 23 16 140 22 Aptium Oncology 200 181 10 10 200 10Astra Tech 213 173 23 14 27 42 Total 14,239 12,805 11 8 6,502 9 9 SECOND QUARTER PRODUCT SALES ANALYSIS World US 2nd 2nd Constant 2nd Quarter Quarter Actual Currency Quarter Actual 2007 2006 Growth Growth 2007 Growth $m $m % % $m % Gastrointestinal: Nexium 1,312 1,283 2 - 855 (1)Losec/Prilosec 298 356 (16) (19) 60 33Others 20 15 33 27 6 n/m Total Gastrointestinal 1,630 1,654 (1) (4) 921 1 Cardiovascular: Crestor 678 480 41 38 353 30Seloken/Toprol-XL 457 478 (4) (6) 339 (10)Atacand 318 276 15 9 63 (2)Tenormin 80 85 (6) (8) 5 (17)Zestril 76 78 (3) (8) 5 (29)Plendil 74 70 6 - 13 117Others 72 73 (1) (7) - (100) Total Cardiovascular 1,755 1,540 14 10 778 6 Respiratory: Symbicort 414 308 34 25 30 n/mPulmicort 320 301 6 4 203 7Rhinocort 95 102 (7) (9) 62 (11)Oxis 23 22 5 - - -Accolate 19 21 (10) (10) 14 (7)Synagis 16 - n/m n/m 2 n/mFluMist - - - - - -Others 40 37 8 3 - - Total Respiratory 927 791 17 12 311 13 Oncology: Arimidex 430 379 13 10 178 14Casodex 331 306 8 5 75 1Zoladex 275 250 10 6 23 (18)Iressa 61 62 (2) - 2 (50)Ethyol 8 - n/m n/m 8 n/mOthers 90 74 22 19 41 52 Total Oncology 1,195 1,071 12 8 327 13 Neuroscience: Seroquel 963 849 13 11 678 9Local anaesthetics 143 140 2 (3) 14 (44)Zomig 106 103 3 (1) 42 (9)Diprivan 66 72 (8) (11) 10 (41)Others 15 14 7 7 4 - Total Neuroscience 1,293 1,178 10 7 748 5 Infection and Other:Merrem 194 143 36 28 35 59Other Products 66 65 2 (6) 32 3 Total Infection and Other 260 208 25 17 67 26 Aptium Oncology 102 93 10 10 102 10Astra Tech 111 90 23 14 14 40 Total 7,273 6,625 10 6 3,268 6 Information for US Investors RECONCILIATION TO UNITED STATES ACCOUNTING PRINCIPLES The consolidated income statement and balance sheet set out on pages 17 and 19,respectively, are prepared in accordance with IASs and IFRSs (collectively "IFRS") as adopted by the European Union (EU), which differ in certain materialrespects from those accounting principles generally accepted in the UnitedStates (US GAAP). The differences as they apply to AstraZeneca PLC areexplained in the Annual Report and Form 20-F Information 2006 except that,during the period, the Company adopted the provisions of FASB InterpretationNo.48 'Accounting for Uncertainty in Income Taxes - an interpretation of FASBStatement No.109' (FIN48). Adoption of FIN48 had no significant effect on thenet income or shareholders' equity in accordance with US GAAP. The effects onincome and shareholders' equity of the GAAP differences are shown below. Income attributable to Shareholders 1st Half 1st Half 2007 2006 $m $m Net income for the period under IFRS 2,986 3,024 Adjustments to conform to US GAAP Purchase accounting adjustments: - amortisation and depreciation (533) (500)- in-process research and development (1,010) (504) Capitalisation less disposals and amortisation of interest (10) (11) Pension and other post-retirement benefits (4) (36) Financial instruments (29) (50) In-licensed development intangibles (69) (97) Deferred taxation - on purchase accounting adjustments 149 139- others 5 (31) Other 39 32 Net income in accordance with US GAAP 1,524 1,966 Net income per Ordinary Share in accordance with US GAAP - basic $1.01 $1.25 Net income per Ordinary Share in accordance with US GAAP - diluted $1.01 $1.24 RECONCILIATION TO UNITED STATES ACCOUNTING PRINCIPLES (CONTINUED) Shareholders' equity 30 June 30 June 2007 2006 $m $m Shareholders' equity under IFRS 14,847 14,910 Adjustments to conform to US GAAP Purchase accounting adjustments:- goodwill 14,423 14,221- property, plant and equipment and intangible assets 4,127 5,003- in-process research and development (1,683) (601) Capitalisation, less disposals and amortisation of interest 210 230 Pension and other post-retirement benefits (44) 1,328 Financial instruments (28) (44) In-licensed development intangibles (378) (212) Deferred taxation - on purchase accounting adjustments (796) (1,400)- others (139) (495) Other 49 27 Shareholders' equity in accordance with US GAAP 30,588 32,967 Shareholder Information ANNOUNCEMENTS AND MEETINGS Announcement of third quarter and nine months 2007 results 1 November 2007 Announcement of fourth quarter and full year 2007 results 31 January 2008 DIVIDENDS The record date for the first interim dividend payable on 17 September 2007 (inthe UK, Sweden and the US) is 10 August 2007. Ordinary shares will tradeex-dividend on the London and Stockholm Stock Exchanges from 8 August 2007.ADRs will trade ex-dividend on the New York Stock Exchange from the 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 these interim financial statements aretrademarks of the AstraZeneca Group of companies: Accolate Arimidex Astra Tech Atacand Casodex Crestor Diprivan EthyolFaslodex FluMist Iressa Losec Merrem Nexium Nolvadex Numax Oxis PlendilPrilosec Pulmicort Pulmicort Respules Recentin Rhinocort Rhinocort AquaSeloken Seroquel Symbicort Symbicort SMART Synagis Tenormin Toprol-XLZestril Zoladex Zomig ADDRESSES FOR CORRESPONDENCE Registrar and Depositary Registered Office Swedish SecuritiesTransfer Office for ADRs Registration CentreThe AstraZeneca Registrar JPMorgan Chase Bank 15 Stanhope Gate VPC ABLloyds TSB Registrars JPMorgan 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 USUKTel (freephone in UK): Tel (toll free in US): Tel: +44 (0)20 7304 5000 Tel: +46 (0)8 402 90000800 389 1580 888 697 8018Tel (outside UK): Tel: +1 (201) 680 6630+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:These interim financial statements contain certain forward-looking statementsabout AstraZeneca. 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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