AstraZeneca PLC Announces Half Year Results 1999.WILMINGTON, Del.--(BUSINESS WIRE)--Aug. 3, 1999-- 'Strong Sales and Profits Growth in Healthcare' Financial Highlights Continuing Operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the (Excluding Zeneca Specialties) Before Exceptional Items Statutory Pro Forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma Basis(1) Basis 1st 1st 1st Constant Half Half Half Currency 1999 1999 1998 % $m $m $m % Sales: Group 9,043 9,043 8,096 + 12 + 12 Healthcare 7,382 7,382 6,360 + 16 + 16 Operating Profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. : Group 2,103 2,091 1,938 + 8 + 9 Healthcare 1,834 1,822 1,610 + 13 + 13 Profit before Tax 2,092 2,059 1,934 + 6 + 7 Earnings per Share $0.83 $0.81 $0.75 + 8 n/a All narrative in this report refers to pro forma growth rates Growth Rates The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures. Notes: Remember, historically high growth rates don't always mean a high rate of growth looking into the future. . Tom McKillop Sir Thomas Fulton Wilson McKillop, born March 19, 1943, is a chemist and pharmaceutical company CEO. McKillop was born in Dreghorn, a small village near the town or Irvine in Ayrshire and educated at Irvine Royal Academy and then Glasgow University, where he took a BSc Hons , Chief Executive, said: "AstraZeneca has made an excellent start with strong sales and profit growth in healthcare. Integration is progressing well and we look forward to the future with great confidence." -- Healthcare sales up 16 percent; US Healthcare sales up 17 percent -- Healthcare operating profit up 13 percent -- Agrochemicals sales down 5 percent -- Specialties sold for $2 billion (H1 99 operating profit: $71 million) -- First interim dividend of $0.23 per Ordinary Share (14.2 pence per share, SEK SEK In currencies, this is the abbreviation for the Swedish Krona. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 1.89 per share) -- New dividend policy including planned share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. programm Group Statutory Basis (including Discontinued Operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. and Exceptional Items) 1st 1st Half Half Reported 1999 1998 $m $m % Profit before Tax 1,342 2,089 - 36 Earnings per Share $0.47 $0.81 - 42 (FRS FRS abbr. Fellow of the Royal Society FRS, n “flexed rotated side-bent,” an osteopathic abbreviation used to describe vertebral position in cases of spinal dysfunction. 3) (1)Pro forma Basis: see basis of calculation description in Note 2. n/a = not applicable Chief Executive Officer's Review of Operations All narrative in this report refers to pro forma growth rates. AstraZeneca was formed on 5 April 1999, the merger being completed in a record 80 working days. AstraZeneca is a leading force in world pharmaceuticals and aims to be 'First for Innovation and Value.' This has been a period of great progress involving the integration of the companies, a fundamental review and restructuring of the Group, while at the same time maintaining business focus to deliver strong results and maximize the potential of the portfolio. The key features of the results are strong sales and profits growth in Healthcare (16 per cent and 13 per cent respectively). This has been achieved through good performances from established products, strong growth from some newer products and valuable contributions from major markets. Outstanding sales of the new fungicide fungicide (fŭn`jəsīd', fŭng`gə–), any substance used to destroy fungi. Some fungi are extremely damaging to crops (see diseases of plants), and others cause diseases in humans and other animals (see fungal infection). Amistar have been more than offset by the generally depressed agrochemicals market, particularly in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. . Integration Integration is proceeding quickly. Over 600 management appointments were made by 1 June 1999, when the Healthcare business began operating on a unified basis. The restructuring of the sales and marketing teams is already taking place and focus has been maintained on the underlying business during this period with sales up 16 per cent. The integration of sales and marketing will be substantially complete by the end of the year and should help to deliver the full potential of the product portfolio. An extensive review of Research and Development is underway and the progress with key projects in the portfolio will be presented at analyst conferences in London and New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of on 6 and 8 December this year. Key decisions on site locations have been made. All synergy targets have been allocated and should deliver $1.1 billion in cost savings within three years of completion of the merger with around 10 per cent being realized in 1999. The charge for synergy and restructuring in the first half of 1999 amounted to $130 million. It is expected that a significant proportion of the total restructuring cost, currently estimated at $1.2 billion, will be charged by the end of the year. Review & Restructuring of Group The sale of Specialties was completed on 30 June 1999 for $2 billion. The disposal realized a pre-tax profit of $237 million and will generate net cash of approximately $1.5 billion. Specialties results for the first half of the year have been consolidated but reported separately as discontinued operations including the contract manufacture of textile color intermediates for BASF BASF Bar Association of San Francisco (since 1872; San Francisco, California) BASF Badische Anilin und Soda Fabrik (German chemical products company) BASF Builders Association of South Florida which will cease in early 2000. Marlow Foods is now classified in Other Trading. A full strategy review of the Salick Health Care business is being undertaken in light of the pressures on the profitability of the US healthcare service sector and the prospect of further tightening of regulations. The Agrochemicals industry, particularly in North America, is currently facing very difficult market conditions created by the lowest commodity prices for over a decade. Although by industry standards our sales performance has been better than many, a program to improve the quality of earnings and ensure the competitiveness of the Agrochemicals business is being accelerated in view of these poor trading conditions. Financials On a continuing operations and pre-exceptional basis, Group sales Group sales Block sale (of large amounts) of securities to institutional investors. group sales The distribution of a new security issue to institutional clients. and operating profits increased by 12 per cent and eight per cent respectively (12 per cent and nine per cent at constant currency). Healthcare sales were up 16 per cent (the same at constant currency) with growth achieved across nearly all products. Operating profits grew by 13 per cent (the same at constant currency). Agrochemicals sales were down five per cent (the same at constant currency) due to significantly reduced demand in the Americas, partially offset by good growth in Western Europe Western Europe The countries of western Europe, especially those that are allied with the United States and Canada in the North Atlantic Treaty Organization (established 1949 and usually known as NATO). and recovery in Asia Pacific. Operating profit declined by 16 per cent (10 per cent at constant currency). The Group operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: declined slightly from 23.9 per cent to 23.3 per cent due partly to product mix and higher manufacturing costs in Healthcare, and increased costs in Agrochemicals in respect of further biotechnology investment and additional manufacturing capacity for Amistar and Touchdown. Earnings per Share increased by eight per cent to $0.81. Dividend Policy including Share Repurchase Program Following changes in the tax treatment of dividends and the removal of tax costs tax costs n. a motion to contest a claim for court costs submitted by a prevailing party in a lawsuit. It is called a "Motion to Tax Costs" and asks the judge to deny or reduce claimed costs. on companies repurchasing their own shares, the AstraZeneca distribution policy will contain both a regular dividend cash flow and a share repurchase component to give the company more flexibility in managing its capital structure over time. Dividends will be paid twice a year, with a greater proportion paid as a second interim, and will be re-based over time so that earnings will cover dividends by between two and three times. The dividend (in the absence of unforeseen circumstances) will be maintained at 70 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. until such time as it falls comfortably within this range. Thereafter, dividends are intended to be grown in line with earnings. Consistent with this policy a first interim dividend of $0.23 (14.2 pence, SEK1.89) will be paid in October. The Group remains highly cash generative gen·er·a·tive adj. 1. Having the ability to originate, produce, or procreate. 2. Of or relating to the production of offspring. generative pertaining to reproduction. with operating cash flows Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. amounting to $2 billion before merger costs. The net cash position amounted to $1.8 billion at 30 June 1999. Cash resources will first be deployed in attractive investments to secure high quality long-term growth. On present cash flow projections A Cash Flow Projection is an attempt to forecast the cash flows that will be generated by an asset, often a company, over a specified time frame. Methodology Projections can be made with varying levels of detail, but any cash flow projection for a business entails and subject to unforeseen additional investment opportunities, at least $2 billion should be available for share repurchases. Healthcare All narrative in this section refers to pro forma growth rates at constant currency. Sales grew by 16 per cent; operating profits were up 13 per cent. Gastrointestinal Sales of Losec/Prilosec, and the whole of the GI franchise, grew by 15 per cent. Prescription growth continues to be strong, with US share of the anti-secretory market increasing to 37 per cent. However, as expected, due to the high stocking of product in June 1998, reported growth in US Prilosec sales was slower, up 11 per cent, compared to the first half of 1998. The quarterly sales profile for 1999 is anticipated to be more evenly spread than last year and this should see good third quarter growth compared to 1998. In Europe Losec sales grew by 29 per cent with strong growth in France, the UK and Sweden. Sales also benefited from the return of marketing rights in Italy and Spain. The launch of generic products in April in Germany led to a flat first half sales performance. Litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. is ongoing against a number of generic products in the German market. Cardiovascular Sales of Cardiovascular products grew by 17 per cent. Zestril sales increased by 18 per cent due to strong growth in the USA where continued prescription growth resulted in the market share increasing to 23.7 per cent. The rate of growth was influenced by wholesaler purchasing which, together with the phasing of a major contract, may result in lower full year growth rates. Sales of Seloken were up 24 per cent due to strong growth in the USA where the product is the only beta blocker Beta blocker A drug that can be used to reduce blood pressure. Mentioned in: Mitral Valve Stenosis beta blocker Beta-adrenergic blocking agent Pharmacology Any of a class of agents that blocks β1 being actively promoted for hypertension. Atacand sales of $73 million resulted from good growth in several major markets. Since its launch in the USA last October, Atacand has gained over a four per cent share of the US A market. Market share in Germany has reached 17 per cent. Respiratory Sales of Respiratory products grew by 11 per cent. In the USA strong demand for Pulmicort cannot be fully met owing to owing to prep. Because of; on account of: I couldn't attend, owing to illness. owing to prep → debido a, por causa de supply limitations. The situation is steadily improving, market share is growing (now approaching five per cent) and the longer term prospects are good. Rhinocort sales grew by 24 per cent helped by strong demand in the USA following a product recall in late 1998. Oxis has continued to increase its market share in all current markets with sales totaling $41 million. Increased competition in the USA and slow progress in some European markets resulted in flat sales for Accolate. However, the latest promotional and DTC DTC See: Depository Transfer Check DTC See: Depository Trust Company DTC See Depository Trust Company (DTC). campaigns in the USA have resulted in some pick-up of prescriptions. Oncology Sales of Oncology products grew by 14 per cent. Casodex sales grew by 44 per cent with continued growth in all markets boosted by strong uptake in France and the launch in Japan. Zoladex sales increased by nine per cent with strongest growth in Japan. The new indication for the treatment of early prostate cancer prostate cancer, cancer originating in the prostate gland. Prostate cancer is the leading malignancy in men in the United States and is second only to lung cancer as a cause of cancer death in men. in combination with radiotherapy is expected to provide further beneficial product differentiation Product Differentiation A source of competitive advantage that depends on producing some item that is regarded to have unique and valuable characteristics. and potential for further sales growth. A total sales increase of eight per cent for Nolvadex was underpinned by double digit Noun 1. double digit - a two-digit integer; from 10 to 99 integer, whole number - any of the natural numbers (positive or negative) or zero; "an integer is a number that is not a fraction" growth in the USA demonstrating the beneficial effect of new indications, including that for the reduction of risk of breast cancer in high risk women. Sales of Arimidex grew by nine per cent. Specialist/Hospital Sales of Specialist/Hospital products (including Pain and CNS See Continuous net settlement. CNS See continuous net settlement (CNS). portfolios) grew by 21 per cent. Strong growth in Seroquel sales to $95 million reflects increasing acceptance of the product's good tolerability profile, especially in the important USA market. Zomig sales were $86 million with particularly strong sales growth in the USA and France. In the US market prescriptions for triptans are trending upwards; total triptan market volume has increased by around 25 per cent over the last 12 months versus a flat position for the US migraine market as a whole. Merrem sales grew by 26 per cent. Xylocaine grew by seven per cent. Diprivan sales increased by two per cent. Strong growth in Japan due to the new indication for use in intensive care has been offset by a small decline in the USA compared to a very strong first half in 1998 but also influenced by the launch of a competitor formulation in April. Astra Tech and Salick Health Care increased sales by 17 and 16 per cent respectively. Geographic Sales in the USA grew by 17 per cent with the comparative growth affected by the pattern of Prilosec sales in 1998 as highlighted above. Sales in Europe grew by 15 per cent with notably strong growth in France of 26 per cent. Sales in Japan grew by five per cent, ahead of market growth, benefiting from new launches and additional indications. Research and Development R & D expenditure totaled $1.16 billion. Increased resources are being applied to the late stage development of ZD4522 ("superstatin"), a new generation PPI (1) (Pixels Per Inch) The measurement of the resolution of a monitor or scanner. For example, a monitor that is 16 inches wide and displays 1600 pixels across its width would have a resolution of 100 ppi (1600 divided by 16). and the thrombin thrombin: see blood clotting. program. Progress with the R & D pipeline will be reported at analyst meetings on 6 and 8 December in London and New York. As a condition of merger approval 'Chirocaine' has been returned to Chiroscience. Two development collaborations have been terminated: the collaboration with CarboMed on ZD0101 (an antiangiogenic an·ti·an·gi·o·gen·ic adj. Inhibiting the growth of blood vessels. antiangiogenic compound in solid tumors in Phase II development) and the collaboration with CytoTherapeutics on 'Actid' (a cell therapy primarily for cancer pain in Phase II development). Operating Margin Operating margin declined slightly from 25.3 per cent to 24.8 per cent partly as a result of product mix and higher manufacturing costs in anticipation of product sales' expansion. The slightly lower rate of spend in R & D at 16 per cent of sales was offset by higher promotional costs, particularly for Nolvadex in the USA. The relative rate of spend on R & D is expected to increase in the second half of the year. Agrochemicals All growth rates in this section are at constant currency and exclude the effects of acquisitions and disposals. Sales decreased by five per cent; operating profit decreased by 10 per cent at constant exchange rates, and excluding the ISK ISK In currencies, this is the abbreviation for the Iceland Krona. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. integration costs charged in 1998, by 19 per cent. Herbicides Herbicide herbicide (hr`bəsīd'), chemical compound that kills plants or inhibits their normal growth. A herbicide in a particular formulation and application can be described as selective or nonselective. sales were down 12 per cent. The impact of the sharp fall in commodity prices to historically low levels has been most marked in the important North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. market. The associated reduction in incomes has led farmers to switch from premium to lower cost products. This movement particularly affected sales of selective herbicides - notably Surpass on corn, Achieve on cereals and Flex and Fusilade on soya - which fell by 19 per cent overall. Non-selective herbicides were unchanged with increases in North America and Asia Pacific offset by a significant fall in Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. due to reduced sales in Brazil following the economic crisis in early 1999. Sales of Touchdown continue to develop successfully with volume growth in excess of 20 per cent. Insecticides Insecticide insecticide Any of a large group of substances used to kill insects. Such substances are mainly used to control pests that infest cultivated plants and crops or to eliminate disease-carrying insects in specific areas. sales decreased by 13 per cent largely due to a 61 per cent decline in the corn insecticide Force as North American growers reduced inputs in response to low corn prices. Karate sales were down two per cent. Fungicides This page aims to list well-known chemical compounds, to stimulate the creation of Wikipedia articles. This list is not necessarily complete or up to date – if you see an article that should be here but isn't (or one that shouldn't be here but is), please update the page Fungicide sales were up 16 per cent with Amistar increasing 38 per cent to $276 million. Amistar's market penetration Noun 1. market penetration - the extent to which a product is recognized and bought by customers in a particular market penetration - the act of entering into or through something; "the penetration of upper management by women" increased in all key markets with the product now registered in 49 countries on 55 crops; preliminary market data indicates that Amistar is now the world's leading fungicide. Sales of Bravo were down four per cent. Geographic European sales were up five per cent overall; strong growth in fungicides and increased market share in Western Europe was somewhat reduced by lower demand from Eastern Europe Eastern Europe The countries of eastern Europe, especially those that were allied with the USSR in the Warsaw Pact, which was established in 1955 and dissolved in 1991. . North American sales decreased 15 per cent with declines in selective herbicides and the insecticide, Force, only partially offset by growth in Amistar and Touchdown. Latin American sales fell by 21 per cent, as a result of the combined impact of low commodity prices and depressed economic conditions in Mercosur. Sales in Asia Pacific, Africa and Australasia were 14 per cent higher as operations in Asia Pacific capitalized on improved local conditions. Research & Development The business has continued to expand its investment in biotechnology research and is entering a new collaborative agreement in rice with Japan Tobacco (agreement completion is scheduled for October 1999). Operating Margin The operating margin reduced from 19.8 per cent to 18.8 per cent due to increased costs in respect of further biotechnology investment and increased operating costs operating costs npl → gastos mpl operacionales on additional manufacturing capacity for Amistar and Touchdown. Advanta Depressed agricultural conditions led to a somewhat reduced contribution from Advanta. Year 2000 Compliance Project The Year 2000 Program for AstraZeneca has moved into its final phase; 98 per cent of the projects to confirm compliance of IT and embedded systems Embedded systems Computer systems that cannot be programmed by the user because they are preprogrammed for a specific task and are buried within the equipment they serve. have been completed and the outstanding projects are being closely managed to meet deadlines. Attention is now focused on continuity and contingency planning. Increased complexity has resulted from the merger and associated changes in systems but management is taking concerted action to ensure there is no loss of focus in achieving full Year 2000 compliance. The Year 2000 Program is expected to cost AstraZeneca $166 million, excluding internal manpower cost allocations. Expenditure to date totals $136 million, including $23 million in the first half of 1999. Exceptional Items Exceptional charges in the first half of the year totaled $822 million (before taxation credits of $141 million). Exceptional charges within operating profit comprise: $130 million of integration costs; $12 million for the program, initiated in mid 1998, to rationalize Astra's US operations following the Astra Merck restructuring agreement. The sale of Specialties realized a gain of $237 million before tax ($140 million after tax) after allowing for the write-off of goodwill ($406 million) previously charged to reserves, costs of separation from other AstraZeneca businesses and provisions for pension liabilities Pension liabilities Future liabilities resulting from pension commitments made by a corporation. Accounting for pension liabilities varies widely by country. . The R & D related payment to Merck of $713 million is included in merger costs. Merck has disputed the basis of calculation and claims the amount should be $822 million. The matter has gone to arbitration. Other merger costs of $204 million include the cost of withdrawing from the development of 'Chirocaine' (as requested by the competition authorities). Taxation The tax charge for the first half of 1999, on continuing operations before exceptional items, was $624 million, representing an effective tax rate of 30 per cent. Only limited tax relief is available on the exceptional items because of the element of goodwill within the charge. Cash Flow Net cash generated from operations before exceptional items amounted to $2.0 billion in the first half of 1999 after absorbing a seasonal build up of working capital in the Agrochemicals business. Capital expenditure of $0.9 billion included a $180 million stage payment to Schering Plough, relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the Losec marketing rights in Italy and Spain, and investment in the expansion of tabletting, bulk drug, Turbuhaler capacity, and research facilities. After tax and dividends of $0.6 billion and $0.8 billion respectively, the net cash outflow for the first half year was $0.3 billion. In the first half year, exceptional cash outflows associated with the merger, including $1.7 billion of payments to Merck and $0.3 billion of merger and integration costs, were matched by cash received from the sale of Specialties. At 30 June cash and short term investments exceeded borrowings by $1.8 billion. Dividends A first interim dividend of $0.23 (14.2 pence, SEK1.89) will be paid on 25 October 1999 to all shareholders on the register on 10 September 1999. Future Prospects The strong business momentum achieved throughout the merger period is being maintained. This should result in good double digit growth in pro forma healthcare profits for the full year, based on continuing robust growth in sales. Research and development programs are moving forward effectively and the progress with the development portfolio will be presented in December. No significant improvement is anticipated in the trading conditions for Agrochemicals. The strategies of the non-pharmaceutical businesses are being reviewed and some restructuring is expected before the year end. Tom McKillop Chief Executive Officer |
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