AstraZeneca PLC - Second Quarter and Half Year Results 2011

Revenue for the second quarter was $8,430 million, down 2 percent at constant exchange rates (CER).
-Strong double-digit growth at CER for Crestor, Symbicort and Seroquel XR.
-Emerging Markets revenue increased by 10 percent at CER.
-Revenue performance reflects the loss of more than $0.5 billion of revenue from generic competition, as well as the impact of government price interventions.
Core operating profit in the second quarter declined by 10 percent at CER to $3,322 million.
-Core R&D expense increased by 8 percent at CER, reflecting the impact of several late stage clinical programme starts which commenced late 2010 and early 2011.
-Core SG&A expense increased by 9 percent at CER, which includes the impact of the excise tax related to US healthcare reform and a one-time expense for termination of a marketing and distribution contract in the US, in addition to investments in Emerging Markets and product launches.
Core EPS in the second quarter was down 5 percent at CER to $1.73.
-Core EPS benefited from the lower number of shares outstanding resulting from share repurchases.
Reported EPS in the second quarter was up 3 percent at CER to $1.53.
-Reported EPS growth was largely the result of lower restructuring costs compared with the prior year.
On 20 July, the Company announced the US FDA approval for Brilinta.
The Board has recommended a first interim dividend of $0.85. Net share repurchases totalled $2.2 billion in the first half. When completed, the entire net proceeds from the sale of Astra Tech will augment share repurchases; depending on the timing, net share repurchases in 2011 could increase to $5 billion.
Core EPS target for the full year increased to the range of $7.05 to $7.35.

Financial Summary Group

2nd Quarter

2011

$m

2nd Quarter

2010

$m

Actual

%

CER

%

Half Year

2011

$m

Half Year

2010

$m

Actual

%

CER

%

Revenue

8,430

8,178

+3

-2

16,722

16,754

-

-3

Reported

Operating Profit

2,965

3,034

-2

-4

6,366

6,677

-5

-5

Profit before Tax

2,858

2,917

-2

-4

6,146

6,436

-5

-5

Earnings per Share

$1.53

$1.46

+5

+3

$3.61

$3.37

+7

+7

Core*

Operating Profit

3,322

3,650

-9

-10

7,000

7,507

-7

-7

Profit before Tax

3,215

3,533

-9

-11

6,780

7,266

-7

-7

Earnings per Share

$1.73

$1.79

-3

-5

$3.96

$3.82

+4

+3

 

London, 28 July 2011 - David Brennan, Chief Executive Officer, said: "Despite the anticipated impact of generic competition and government pricing interventions in the quarter, we are able to raise our Core earnings per share guidance and increase our shareholder cash return targets for the full year. The approval of Brilinta in 41 countries around the world, most recently in the US, demonstrates our commitment to deliver our global, innovation-driven biopharmaceuticals strategy."

 

Business Highlights

 

 

All narrative in this section refers to growth rates at constant exchange rates (CER) unless otherwise indicated. Arimidex and Toprol-XL. Group revenue in the Rest of World was down 1 percent, reflecting generic competition for Nexium, chiefly in Western Europe, and for Arimidex. Revenue in Western Europe was down 9 percent. Revenue in Emerging Markets increased 10 percent. Revenue in Established Rest of World was up 4 percent. Entocort. The remainder of the increase is the result of investments in Emerging Markets and new product launches partially offset by ongoing sales and marketing efficiencies. SG&A expense growth is anticipated to moderate in the second half of the year. Core R&D expense was up 8 percent, reflecting spending on late stage clinical projects that were initiated in the latter part of 2010 and early 2011. Adjustments to Core operating profit totalled $357 million in the quarter, $259 million lower than last year, chiefly on lower restructuring costs. As a result, the 4 percent decline in reported operating profit, to $2,965 million, was less than the decline on a Core basis. 3

reported earnings (before restructuring costs).

The Board has recommended a first interim dividend of $0.85 (51.9 pence, 5.33 SEK), an increase of 21 percent over last year’s first interim dividend of $0.70. The amount of the first interim dividend is a reflection of the Board’s intent to rebalance the first and second interim dividends, with the aim of setting the first interim dividend at around a third of the prior year dividend, which last year was $2.55.

In setting the distribution policy and the overall financial strategy, the Board’s aim is to continue to strike a balance between the interests of the business, our financial creditors and our shareholders. After providing for business investment, funding the progressive dividend policy and meeting our debt service obligations, the Board will keep under review the opportunity to return cash in excess of these requirements to shareholders through periodic share repurchases.

In the first half, the Company completed net share repurchases of $2,204 million towards its target of $4 billion for 2011. The Group has repurchased 51.6 million shares for a total of $2,544 million in the first half, whilst 9.0 million shares were issued in consideration of share option exercises for a total of $340 million. The total number of shares in issue at 30 June 2011 was 1,366 million.

The Board has determined that net proceeds from the disposal of Astra Tech, when completed, are to be used to augment the share repurchase programme to levels above the current $4 billion target. Depending on the timing of the transaction, the Company estimates that net share repurchases could increase to $5 billion in 2011; with repurchases from any remaining balance of the Astra Tech proceeds to be completed in 2012.

Enhancing Productivity

Good progress continues on the previously announced business reshaping programmes. In the second quarter, $138 million in restructuring costs were charged, with more than half of this related to R&D restructuring activities.

In aggregate, restructuring costs of $281 million have been incurred in the first half. The programmes remain on track for costs incurred and benefits achieved.

Research and Development Update

A comprehensive update of the AstraZeneca R&D pipeline is presented in conjunction with this Half Year 2011 results announcement, and is available on the Company’s website, www.astrazeneca.com, under information for investors.

The AstraZeneca pipeline now includes 88 projects in the clinical phase of development. There are 9 NME projects currently in late stage development, either in Phase III or under regulatory review. In the first half of 2011, 15 projects have successfully progressed to their next phase (including 6 projects entering first human testing); 14 projects have been withdrawn.

Significant pipeline developments since the first quarter update include:

Brilinta

On 20 July 2011, AstraZeneca announced that the US Food and Drug Administration (FDA) has approved

Brilinta (ticagrelor) tablets to reduce the rate of heart attack (myocardial infarction [MI]) and cardiovascular (CV) death in adult patients with acute coronary syndrome (ACS), compared to clopidogrel.

Brilinta

, a new oral antiplatelet medicine, is indicated to reduce the rate of thrombotic cardiovascular events in patients with ACS (unstable angina, non-ST-elevation myocardial infarction, or ST-elevation myocardial infarction). Brilinta has been shown to reduce the rate of a combined endpoint of CV death, MI or stroke compared to clopidogrel. The difference between treatments was driven by CV death and MI with no difference in stroke. In patients treated with an artery-opening procedure known as percutaneous coronary intervention (PCI), Brilinta reduces the rate of stent thrombosis. Brilinta has been studied in ACS in combination with aspirin. Maintenance doses of aspirin above 100mg decreased the effectiveness of Brilinta. Avoid maintenance doses of aspirin above 100mg daily.

Brilinta

, like other antiplatelet agents, can cause significant, sometimes fatal, bleeding. In PLATO, there was no statistical difference in patients treated with Brilinta compared to patients treated with clopidogrel in total major bleeding events (11.6% vs. 11.2%), including fatal and fatal/life-threatening bleeding events. Non-CABG (coronary artery bypass graft) major + minor bleeding events (8.7% vs. 7%) were more common with Brilinta versus clopidogrel. 4

The most commonly observed adverse reactions associated with the use of

As with all AstraZeneca products, the Company will work to ensure that physicians and patients understand both the benefits and risks associated with

Now that

Brilinta vs. clopidogrel were bleeding (11.6% vs.11.2%) and a feeling of breathlessness called dyspnoea (14% vs. 8%). Brilinta. For Brilinta, one of the ways AstraZeneca will help ensure physicians and patients are appropriately informed about bleeding risk and the impact of aspirin dose on the effectiveness of Brilinta is through a Risk Evaluation Mitigation Strategy (REMS). Brilinta is approved in the US, AstraZeneca will begin the process of working with hospital formularies, protocol committees, government and managed care reimbursement bodies to bring this medicine to patients. Navigating these steps, which are nec

Posted: July 2011


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