RNS Number:9112N
AstraZeneca PLC
24 July 2003
AstraZeneca PLC
Second Quarter and Half Year Results 2003
"First half results ahead of expectations. Interim dividend increased by 10
percent. EPS targets for the year increased."
Financial Highlights
Group 2nd Quarter 2nd Quarter Actual CER Half Year Half Year Actual CER
2003 2002 % % 2003 2002 % %
$m $m $m $m
Sales 4,436 4,312 +3 -4 9,171 8,658 +6 -
Operating Profit 889 1,064 -16 -18 2,161 2,361 -8 -10
Profit before Tax 921 1,065 -14 -17 2,214 2,383 -7 -9
Earnings per Share $ 0.39 $ 0.45 -13 -16 $ 0.93 $ 1.00 -6 -8
All narrative in this section refers to growth rates at constant exchange rates
(CER)
* Sales for the first half year were unchanged in CER terms despite the
loss of $1.2 billion in US sales of PrilosecTM, ZestrilTM and NolvadexTM.
* Operating profit for the first half declined by 10 percent, chiefly on
lower other operating income this year ($62 million) in comparison to last year
($211 million), which included a disposal gain.
* Sales for key growth and launch products increased by 48 percent to
$3.7 billion in the first half.
* Second quarter sales were down 4 percent as a result of the
anticipated wholesaler destocking in the US market. Sales outside the US
increased 4 percent.
* Operating profit in the second quarter was down 18 percent, as the
anticipated destocking was accompanied by modest increases (up 3 percent CER) in
R&D and SG&A expense.
* Nexium sales in the first half increased by 76 percent to $1,466
million. Sales in the last 12 months exceeded $2.6 billion.
* CrestorTM sales were $12 million as the product continues to perform
well in its first launch markets. On 9 July an Advisory Committee to the US
Food and Drug Administration voted unanimously to recommend approval for Crestor
TM.
* Sales of IressaTM were $66 million in the first half year, including
$18 million in the US since its launch in mid-May.
* The Board has recommended an increase in the interim dividend to
$0.255.
Sir Tom McKillop, Chief Executive, said: "The successful transformation of our
product range is shown by the replacement of $1.2 billion US sales of Prilosec
TM, ZestrilTM and NolvadexTM lost to generics by new and high growth products,
leaving sales unchanged for the first half. As a result of this strong sales
performance and prospects for the rest of the year we have raised our earnings
target for the year to the range of $1.65 to $1.75 per share. We have also
increased the interim dividend by 10 percent to $0.255."
London, 24 July 2003
Media Enquiries: Steve Brown/Emily Denney (London) (020) 7304 5033/5034
Staffan Ternby (Sodertalje) (8) 553 26107
Rachel Bloom (Wilmington) (302) 886 7858
Analyst/Investor Enquiries: Mina Blair-Robinson (London) (020) 7304 5084
Jonathan Hunt (London) (020) 7304 5087
Staffan Ternby (Sodertalje) (8) 553 26107
Ed Seage/Jorgen Winroth (USA) (302) 886 4065/(212) 581 8720
Business Highlights All narrative in this section refers to growth rates at
constant exchange rates (CER) unless otherwise indicated.
First Half
First half sales were unchanged from the prior year in CER terms. The
strengthening of exchange rates versus the US dollar lifted the actual sales
growth rate to 6 percent. Operating profit was down 10 percent, chiefly on
significantly lower other operating income in comparison to last year, which
included a disposal gain. Costs were well managed as SG&A and R&D costs grew by
4 percent in CER terms. The currency benefit on operating profit was 2
percentage points positive. Earnings per share declined by 8 percent to $0.93.
In view of the increased expectations for the year and the progress of the
portfolio transformation, the Board has recommended an increased first interim
dividend of $0.255 (15.9 pence; SEK 2.07) to be paid on 6 October 2003.
Sales for the first half were up 5 percent in markets outside the US, and were
down by 4 percent in the US market. The portfolio transformation is progressing
well. Global sales of the cohort of ten recently launched and growth products
increased by 48 percent to $3.7 billion, and now comprise 40 percent of sales.
This strong growth offset the loss of $1.2 billion US sales of PrilosecTM,
ZestrilTM and NolvadexTM, leaving total first half sales unchanged compared to
2002.
NexiumTM sales increased by 76 percent in the first half, with strong growth in
the US (up 74 percent) and in the rest of the world (up 83 percent). During the
second quarter, NexiumTM share of new prescriptions in the US PPI market
surpassed those of PrilosecTM and generic omeprazole combined. NexiumTM now
ranks second in new prescriptions share of the overall US PPI market, and first
in new prescriptions by gastroenterologists.
SymbicortTM sales were $249 million in the first half (up 79 percent) on market
share gains in the rapidly growing market for fixed combination asthma
treatments.
Sales for IressaTM reached $66 million in the first half, including $18 million
in sales in the US since launch in mid-May. Through the end of June nearly
5,000 retail prescriptions have been dispensed for IressaTM in the US and,
including patients still in the expanded access programme, it is estimated that
as many as 10,000 patients may be currently taking IressaTM in this market.
CrestorTM continues to perform well in its first launch markets. Sales were $12
million in the first half. CrestorTM share of the dynamic segment of the statin
market (defined as new and switch patients but excluding from the data pool
patients who are simply continuing their existing treatment) is around 30
percent in Canada (private payer segment only) and in the Netherlands. On 9 July
the Endocrinology and Metabolic Advisory Committee to the US Food and Drug
Administration voted unanimously to recommend approval for CrestorTM.
Second Quarter
Sales in the second quarter were down 4 percent in CER terms. The weaker US
dollar lifted the reported actual sales growth to 3 percent. Operating profit
was down 18 percent as costs grew against a sales decline. R&D and SG&A costs
continue to be tightly managed, growing by 3 percent in CER terms. The currency
effect on operating profit was 2 percentage points positive. Earnings per share
in the second quarter were 16 percent lower, at $0.39.
Sales outside the US increased by 4 percent in the quarter, as sales growth from
NexiumTM, SymbicortTM and Oncology products more than offset declines in LosecTM
and ZestrilTM.
US sales were down 11 percent as a result of wholesaler destocking and as
generic erosion continued on PrilosecTM (down 52 percent), NolvadexTM (down 94
percent) and ZestrilTM (down 86 percent). US sales excluding these three
products grew by 23 percent (or by an estimated 35 percent on an underlying
demand basis, adjusted for the net destocking effect).
As expected, wholesaler stocks declined from the levels seen in the first
quarter. Estimated inventory levels at the end of the second quarter are now at
or below normal for NexiumTM and SeroquelTM and are trending down for AtacandTM.
Wholesaler purchasing in excess of underlying demand continued for Toprol-XLTM
in the second quarter. Across the entire product range, the company estimates
the value of inventory in the distribution channels has been reduced to around
$200 million above normal (half the level at the end of the first quarter), the
majority of which is Toprol-XLTM.
Future Prospects All narrative in this section refers to growth rates at
constant exchange rates (CER) unless otherwise indicated.
Based on the strong performance to date, prospects for the second half, and
assuming current exchange rates hold for the remainder of the year, the company
has increased its expectations for earnings per share for the full year to the
range of $1.65 to $1.75 per share.
Disclosure Notice: The preceding forward looking statements relating to
expectations for earnings and business prospects for AstraZeneca PLC are subject
to risks and uncertainties, which may cause results to differ materially from
those set forth in the forward looking statements. These include, but are not
limited to: the rate of growth in sales of generic omeprazole in the USA, the
successful registration and launch of new products (in particular CrestorTM,
IressaTM, and ExantaTM), continued growth of currently marketed products, the
growth in costs and expenses, interest rate movements, exchange rate
fluctuations, and changes in the tax rate. For further details on these and
other risks and uncertainties, see AstraZeneca PLC's Securities and Exchange
Commission filings, including the 2002 Annual 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 %
2003 2002 2003 2002
LosecTM/PrilosecTM 742 1,116 -39 1,434 2,308 -42
NexiumTM 631 464 +31 1,466 811 +76
Total 1,390 1,597 -18 2,935 3,149 -11
* Sales of NexiumTM in the second quarter grew by 50 percent in markets
outside the US. Total prescriptions in the US for the second quarter grew by 50
percent , but wholesaler destocking resulted in a sales increase of 25 percent.
The company believes that US wholesaler inventories for NexiumTM are now at or
even somewhat below normal at the end of the quarter.
* Sales of NexiumTM in the first half were up 74 percent in the US, and by
83 percent in the rest of the world. Global sales of NexiumTM in the last 12
months exceeded $2.6 billion.
* NexiumTM continues to build upon its market leading share of new
prescriptions by GI specialists in the US, and in the overall market, NexiumTM
prescriptions have now overtaken those of PrilosecTM and omeprazole combined, to
become the number two PPI in the US market.
* US sales of PrilosecTM were down by 52 percent in the second quarter and
by 56 percent in the half year. Total prescriptions in the US were down by 65
percent through June. PrilosecTM share of total omeprazole prescriptions in the
US was 35 percent in June.
* Sales of LosecTM in markets outside the US were down by 18 percent in
the quarter, and by 20 percent in the first half. Good growth is still being
achieved in Japan, with sales up 48 percent in the first half.
Cardiovascular
Second Quarter CER % Half Year CER %
2003 2002 2003 2002
SelokenTM / Toprol-XLTM 380 206 +79 748 437 +67
AtacandTM 152 129 +6 358 278 +20
PlendilTM 129 97 +26 239 203 +12
ZestrilTM 118 269 -61 226 546 -63
CrestorTM 9 - n/m 12 - n/m
Total 967 889 +1 1,936 1,835 -
* Toprol-XLTM continues its strong growth in the US. Market share of
total beta blocker prescriptions reached 25.1 percent in June, and prescriptions
increased by 29 percent through June. US sales in the second quarter (up 112
percent) once again exceeded underlying demand. As a result, the company
estimates channel inventories are more than $150 million above normal levels at
the end of the quarter.
* Sales of SelokenTM/Toprol-XLTM outside the US increased by 13 percent in
the second quarter and by 12 percent in the first half.
* Total prescriptions for AtacandTM products in the US were up 14 percent
through June, and first half sales were up 20 percent. US sales were down 19
percent in the second quarter on wholesaler destocking of inventories which,
although declining, remain higher than normal at the end of the period.
* Sales of AtacandTM outside the US increased by 17 percent in the quarter
and by 19 percent in the first half.
* Sales of CrestorTM totalled $12 million in the first half, $9 million
of which came in the second quarter. The performance of CrestorTM in the three
largest markets where it has launched to date-Canada, the Netherlands, and the
UK-continues to meet the company's expectations. From an analysis of the
dynamic segment of the statin market (which excludes patients from the data pool
who are simply continuing their current medication) the company estimates that
in the Canadian private payer market CrestorTM has around a 30 percent share
after 21 weeks, and a similar share in the Netherlands after 19 weeks.
* CrestorTM was launched in Sweden and four other countries in the
second quarter. The company is planning for another six launches before the end
of 2003, including the US. Approval in Japan is now expected to be in the first
half of 2004.
* On 9 July the Endocrinology and Metabolic Advisory Committee to the US
Food and Drug Administration voted unanimously to recommend approval for Crestor
TM as an adjunct to diet for the treatment of various lipid disorders.
Respiratory
Second Quarter CER % Half Year CER %
2003 2002 2003 2002
SymbicortTM 127 68 +61 249 122 +79
PulmicortTM 239 199 +13 490 426 +9
RhinocortTM 96 81 +17 186 144 +26
AccolateTM 25 33 -27 56 65 -16
OxisTM 29 30 -16 60 61 -13
Total 552 448 +13 1,115 890 +16
* SymbicortTM sales were up 61 percent in the second quarter and by 79
percent in the first half. The combination market continues to grow strongly
and SymbicortTM is gaining market share. Market share across Europe is now over
25 percent; SymbicortTM in Sweden is over 50 percent of the fixed combination
market, in Germany it is 33 percent, and in France, it has achieved 30 percent
of the market according to the most recent monthly data. The regulatory
submission in the US for SymbicortTM is now scheduled for 2005.
* PulmicortTM sales in the US were up 51 percent in the second quarter and
by 37 percent in the first half, chiefly on strong prescription growth for
PulmicortTM RespulesTM (up 34 percent through June) coupled with wholesaler
stocking on both PulmicortTM RespulesTM and PulmicortTM TurbuhalerTM .
* Sales of RhinocortTM reflect growth in the US market (up 39 percent in
the first half), where increasing sales of RhinocortTM Aqua have more than
offset the sales lost from the discontinuation of RhinocortTM Nasal Inhaler (due
to the phase-out of CFC containing products). Market share and total
prescriptions for RhinocortTM Aqua have grown on a year-to-date basis, as have
wholesaler inventories.
Oncology
Second Quarter CER % Half Year CER %
2003 2002 2003 2002
CasodexTM 228 148 +41 417 271 +43
ZoladexTM 213 195 - 406 382 -1
ArimidexTM 143 79 +70 236 144 +54
IressaTM 47 - n/m 66 - n/m
FaslodexTM 15 8 +88 37 8 n/m
NolvadexTM 39 117 -70 100 257 -63
Total 690 553 +15 1,271 1,073 +10
* CasodexTM sales in markets outside the US were up 19 percent in the
quarter, and by 22 percent in the first half. The second quarter sales growth
rate in the US (up 118 percent) reflects wholesaler stocking in the current
quarter coupled with destocking in the same period last year.
* Sales for ArimidexTM outside the US increased by 50 percent in the
quarter and by 46 percent at the half year. The indication for adjuvant
treatment for early breast cancer is now approved in 25 countries. ArimidexTM
share of the global market for aromatase inhibitors has increased by 15
percentage points since the clinical data supporting its use for early breast
cancer were first presented in December 2001.
* Total prescriptions for ArimidexTM in the US are up 54 percent through
June. Sales were up 66 percent in the first half, but were up 94 percent in the
second quarter, indicating some wholesaler stockbuilding in the quarter.
* In May it was announced that clinical trials in the US and in Europe
will evaluate the efficacy and safety of ArimidexTM in patients with very early
breast cancer and in women at high risk of developing the disease.
* Sales of IressaTM reached $66 million in the first half, including $18
million in the US since launch in mid-May. Through June nearly 5,000 retail
prescriptions have been dispensed for IressaTM in the US. Sales in Japan in the
second quarter returned to a more normal trend line from that seen in the first
quarter.
* FaslodexTM sales increased to $37 million in the first half, indicating
that FaslodexTM is a welcome addition to treatment options for the management of
advanced breast cancer.
* The global sales decline in NolvadexTM reflects the entry of multiple
generic tamoxifen products in the US market since the end of February.
CNS
Second Quarter CER % Half Year CER %
2003 2002 2003 2002
SeroquelTM 270 263 -1 714 592 +18
ZomigTM 54 74 -35 162 166 -8
Total 331 345 -9 891 773 +11
* Total prescriptions for SeroquelTM in the US continue to grow strongly,
up 35 percent through June. Market share in June was 19.6 percent, up 2 points
this year. SeroquelTM is the only product among the top three in the atypical
antipsychotic class to gain market share this year.
* In contrast to the prescription trend, SeroquelTM sales in the US have
been distorted by wholesaler stocking patterns. Sales in the second quarter
were down 11 percent as the above normal wholesaler inventories carried from the
first quarter were unwound. First half sales were up 10 percent, with
inventories at the end of the period back to normal levels.
* SeroquelTM sales outside the US increased by 38 percent in the second
quarter and by 56 percent in the first half.
* Sales of ZomigTM outside the US increased by 6 percent in both the
second quarter and the first half. In the US, second quarter sales were down 76
percent as wholesalers destocked following the April price changes.
Pain, Infection and Other Pharma
Second Quarter CER % Half Year CER %
2003 2002 2003 2002
MerremTM 80 74 +5 154 141 +8
DiprivanTM 98 111 -17 234 222 -
XylocaineTM 50 45 +9 88 85 +2
MarcaineTM 23 18 +22 42 35 +14
Total 369 357 -2 746 699 +2
* MerremTM sales growth of 8 percent in the first half resulted from
growth in non-US markets (up 16 percent) more than offsetting a decline in US
sales (down 22 percent) due to constrained supply.
* Sales of DiprivanTM were unchanged in the first half, as US
stockbuilding in the first quarter of this year was followed by destocking in
the second quarter.
Geographic Sales
Second Quarter CER % Half Year CER %
2003 2002 2003 2002
USA 1,962 2,214 -11 4,432 4,597 -4
Europe 1,646 1,401 -2 3,201 2,788 -1
Japan 293 240 +11 536 412 +20
RoW 535 457 +17 1,002 861 +18
* Second quarter sales in the US were down 11 percent and were affected,
as expected, by wholesaler destocking of the above normal inventories present at
the end of the first quarter. Generic competition for PrilosecTM, ZestrilTM,
and NolvadexTM reduced sales of these three products by $ 1.2 billion in the
first half, yet total US sales were off just 4 percent.
* Sales in Europe were down 2 percent in the quarter and by 1 percent the
first half. Growth in France and Spain was offset by sales declines in the UK
and pricing pressures in Italy and Germany. Notable product growth was achieved
for NexiumTM, Symbicort, SeroquelTM, and CasodexTM.
* Sales growth in Japan in the first half (up 20 percent) was driven by
IressaTM, SeroquelTM, LosecTM, and CasodexTM.
Operating Review
Half Year
Reported sales were up 6 percent (unchanged CER) and operating profits down 8
percent (CER down 10 percent). The weaker US dollar increased sales growth by 6
percentage points but also increased costs so that the effect at the profit
level was reduced to 2 points. Gross margin increased by 0.5 points due to
favourable mix, including lower proportional payments to Merck. Operating
margins declined by 3.7 points to 23.6 percent. R&D and SG&A continue to be
tightly managed, growing by 4 percent in CER terms. Other operating income is
significantly lower in comparison with last year, which included a disposal gain
and accounts for around 1.6 points of the margin decline.
Second Quarter
Reported sales grew by 3 percent, operating profits fell by 16 percent. At
constant exchange rates, sales fell by 4 percent and operating profit by 18
percent. Operating margin at 20.0 percent fell by 4.7 percentage points as a
result of declining sales while costs increased. Currency also depressed
margins. R&D and SG&A costs remained well controlled in the quarter increasing
by only 3 percent in CER terms. Also, in the quarter, the disposal of Marlow
Foods was completed and a small gain was included in other income.
Currency for the year is expected to have a small positive effect on earnings
per share (around 4 cents) as the relative strength of the Euro has a positive
effect on sales, outweighing the negative effect on costs as a result of the
stronger sterling and Swedish Krona.
Wholesaler Stocking
Sales in the first quarter's results were increased by speculative wholesaler
purchases made ahead of anticipated price increases. At the end of the first
quarter it was estimated that wholesaler inventories were approximately $400
million above normal. As expected, during the second quarter, inventory levels
reduced and at the end of June it was estimated that wholesaler inventories had
fallen to around $200 million above normal, a significant part of which was
Toprol-XLTM with most other major products affected - including NexiumTM and
SeroquelTM having returned to normal or below normal levels.
Interest and Dividend Income
Net interest and dividend income for the first half of 2003 was $53 million,
$32 million in the second quarter, with higher overall cash balances
compensating for lower yields on investments together with a reduction in
exchange losses (particularly in the second quarter) compared with the same
periods last year.
Taxation
The effective tax rate for the second quarter and half year was 27.5 percent
compared with 27.0 percent for the comparative periods in 2002.
Cash Flow
Cash generated from operating activities before exceptional items in the first
half of the year fell to $2,473 million from $3,149 million in the comparative
period, a decline caused by a combination of lower operating profits, inventory
increase and the timing of creditor settlements. Cash expenditure on
exceptional items was $381 million, compared to $55 million in 2002 - the
Zoladex settlement in the second quarter was the major element. Tax paid in the
first six months was $762 million, $347 million higher than the same period in
2002 due to earlier payment of US taxes. Net capital expenditure was broadly
comparable with the comparative period, totalling $673 million in the six
months. The cash inflow of $80 million in respect of acquisitions and disposals
represents the disposal of Marlow Foods in the second quarter. Share
repurchases totalled $311 million and in the second quarter indebtedness of $319
million was repaid. Net cash funds fell by $235 million from the beginning of
the year to stand at $3,609 million at 30 June 2003.
Dividends
A first interim dividend of $0.255 (15.9 pence, SEK 2.07) will be paid on 6
October 2003 to all shareholders on the register on 22 August 2003.
Share Repurchase Programme
During the second quarter 4.6 million ordinary shares were repurchased for
cancellation at a cost of $182 million bringing the total repurchases for the
first half of the year to 8.6 million shares at a total cost of $311 million.
Since the start of this programme 74.2 million shares have been repurchased at a
total cost of $3,116 million. The total number of shares in issue (as at 30
June 2003) is 1,710 million. Approximately $900 million remains available under
the previously announced share repurchase programme.
Upcoming Milestones and Key Events
2 October Annual Business Review, Wilmington, USA
23 October Announcement of third quarter results
Sir Tom McKillop
Chief Executive
This information is provided by RNS
The company news service from the London Stock Exchange
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