AZN » Topics » INTRODUCTION

These excerpts taken from the AZN 20-F filed Mar 27, 2007.
INTRODUCTION
In this section, we have applied the best practice principles of an operating and financial review and discuss the main trends and factors underlying the development, performance and position of AstraZeneca during 2006.

To that end, we provide in this business review an overview of AstraZeneca’s business environment and information about our research, development, manufacturing and sales and marketing activities worldwide, including our 2006 performance in these areas, as seen through the eyes of the Board.

We describe the external environment in which we operate, including the opportunities and challenges, the market for pharmaceuticals, the competitive and regulatory environment, and the principal risks and uncertainties.

We describe our strategy for managing the opportunities and challenges of our business environment, the resources that we bring to bear and how they are aligned to create value through achievement of our strategic objectives, and likely future developments in our business. We also highlight the importance of leadership, effective decision-making and risk management.

Finally, we explain how our progress towards achievement of our objectives is measured.

In the therapy area, geographic and financial reviews, we report on our financial performance during 2006 at a global level, in different geographic areas and at a product level. We also report in detail on the progress of our pipeline and developments in relation to our marketed products (such as new indications, regulatory filings and clinical trial data).

CONTENTS  
Business environment 9
Growing demand for healthcare 9
World markets 9
Therapy areas 9
Growing challenges for industry 10
Strategy 11
Our resources, skills and capabilities 12
Our medicines 12
Our research & development 13
Our people 13
Risk management 14
Reputation and responsibility 14
Measuring performance 15
Therapy area review 16
Cardiovascular medicines 16
Gastrointestinal medicines 20
Neuroscience medicines 23
Oncology medicines 26
Respiratory and Inflammation medicines 29
Infection medicines 32
Geographic review 33
Research and development 37
Pipeline strategy 37
Discovery research 38
Development 39
Externalisation 39
Development pipeline table 40
Portfolio management and  
commercialisation 43
Supply 44
Managing risk 45
Corporate responsibility 47
People 48
Main facilities 49
Other businesses 49
Aptium Oncology 49
Astra Tech 49
Industry regulation 50
Product regulation 50
Price regulation 50
Reporting performance 52
Financial review 53


DIRECTORS’ REPORT 9
Business Review  
INTRODUCTION
The accompanying consolidated Financial Statements included in this Annual Report are prepared in accordance with adopted IFRSs. There are certain significant differences between adopted IFRS and US GAAP which affect AstraZeneca’s net income and shareholders’ equity and, on pages 149 to 156, additional information under US GAAP is set out as follows:

> Summary of differences between adopted IFRS and US GAAP accounting principles; pages 149 to 150.
   
> Net income; page151.
   
> US GAAP condensed consolidated statement of operations; page 151.
   
> US GAAP statement of comprehensive income; page 152.
   
> Stock-based compensation; page152.
   
> Pension and post-retirement benefits; pages152 to 154.
   
> Taxation; page 155.
   
> Shareholders’ equity; page155.
   
> Acquired intangible assets and goodwill; page156.

This excerpt taken from the AZN 6-K filed Mar 6, 2007.

INTRODUCTION

The purpose of this Summary Financial Review is to provide a balanced and comprehensive analysis, including the key business factors and trends, of the financial performance of the business during 2006, the financial position as at the end of the year and the main business factors and trends which could affect the future financial performance of the business.

Over 97% of our sales are made in the prescription pharmaceuticals sector, which tends to be relatively insensitive to general economic circumstances in the short term. It is more directly influenced by medical needs and is generally financed by health insurance schemes or national healthcare budgets.

Our operating results in both the short and long term can be affected by a number of factors other than normal competition:
> The risk of generic competition following loss of patent exclusivity or patent expiry, with the potential adverse effects on sales volumes and prices, for example, the launch of generic competition to Toprol-XL 25mg in November 2006.
> The timings of new product launches, which can be influenced by national regulators and the risk that such new products do not succeed as anticipated.
> The rate of sales growth and costs following new product launches.
> The adverse impact on pharmaceutical prices as a result of the regulatory environment. Although there is no direct governmental control on prices in the US, pressures from individual state programmes and health insurance bodies are leading to downward forces on realised prices.
In other parts of the world, there are a variety of price and volume control mechanisms and retrospective rebates based on sales levels that are imposed by governments.
> Currency fluctuations. Our functional and reporting currency is the US dollar, but we have substantial exposures to other currencies, in particular the euro, Japanese yen, sterling and Swedish krona.

Over the longer term, the success of our research and development is crucial, and we devote substantial resources to this area. The benefits of this investment emerge over the long term and inherently there is considerable uncertainty as to whether it will generate future products.

The most significant features of our financial results in 2006 are as follows:
   
> Sales growth on an underlying basis of 11% to $26,475 million.
> Sustained strong sales performances from our five key growth products to $13,318 million (over 50% of sales), an increase of 23%.
> Operating profit of $8,216 million, with an operating margin improvement of 3.8 percentage points to 31.0%.
> 11 products in the portfolio with annual sales in excess of $1 billion compared to two products five years ago.
> Free cash flow of $6,788 million, up by $736 million.
> Earnings per share growth of 34% to $3.86.
> Strengthening of the R&D portfolio through 12 significant licensing and acquisition projects and with nine significant research collaborations between December 2005 and January 2007.
> Investment in R&D has increased by an underlying 16% to $3,902 million. This reflects both an increase in underlying activity and the effects of acquisitions.

Over the five years to the end of 2006, we have achieved a compound annual growth in sales of just over 10% and EPS growth of 17%. We accomplished this whilst facing patent expirations on products whose sales represented almost half our turnover at that time.

We believe that the momentum in sales and profit growth established over the last two years can be maintained through life-cycle opportunities and continued improvement in productivity. Long term, performance will be driven by the delivery of new medicines to the market from within our research pipeline or from external sources.

This excerpt taken from the AZN 6-K filed Mar 6, 2007.
INTRODUCTION
The accompanying consolidated Financial Statements included in this Annual Report are prepared in accordance with adopted IFRSs. There are certain significant differences between adopted IFRS and US GAAP which affect AstraZeneca’s net income and shareholders’ equity and, on pages 149 to 156, additional information under US GAAP is set out as follows:

> Summary of differences between adopted IFRS and US GAAP accounting principles; pages 149 to 150.
   
> Net income; page151.
   
> US GAAP condensed consolidated statement of operations; page 151.
   
> US GAAP statement of comprehensive income; page 152.
   
> Stock-based compensation; page152.
   
> Pension and post-retirement benefits; pages152 to 154.
   
> Taxation; page 155.
   
> Shareholders’ equity; page155.
   
> Acquired intangible assets and goodwill; page156.

This excerpt taken from the AZN 6-K filed Aug 4, 2006.
Introduction
We have been instructed by the Company to review the financial information comprising the consolidated income statement, balance sheet, cash flow statement and statement of recognised income and expense for the six months ended and as at 30 June 2006 and notes 1 to 4 (set out on pages 12, 14 to 16 and 18 to 21, respectively). We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information.

This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Listing Rules of the Financial Services Authority. Our review has been undertaken so that we might state to the Company those matters we are required to state to it in 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 for our review work, for this report, or for the conclusions we have reached.

This excerpt taken from the AZN 6-K filed Jun 2, 2006.

Introduction

The boards of AstraZeneca and CAT announce that they have agreed terms of a recommended cash offer to be made by AstraZeneca to acquire the entire issued and to be issued share capital of CAT not otherwise held by AstraZeneca, either in the form of CAT Shares or CAT ADSs. The terms of the Offer value the existing issued share capital of CAT, excluding AstraZeneca’s existing shareholding in CAT, at approximately £567 million and the entire issued share capital of CAT at approximately £702 million.

Goldman Sachs International is acting as financial adviser to AstraZeneca. Goldman, Sachs & Co. is acting as the dealer manager in the United States for AstraZeneca. Morgan Stanley is acting as financial adviser to CAT.

This excerpt taken from the AZN 20-F filed Mar 23, 2006.
INTRODUCTION
The accompanying consolidated Financial Statements included in this Annual Report are prepared in accordance with IFRS as adopted by the EU. There are certain significant differences between IFRS and US GAAP which affect AstraZeneca’s net income and shareholders’ equity and, on pages 130 to 136, additional information under US GAAP is set out as follows:

> Summary of differences between IFRS and US GAAP accounting principles; page 130.
> Net income; page 131.
> US GAAP condensed consolidated statement of operations; page 131.
> US GAAP statement of comprehensive income; page 132.
> Stock-based compensation; page 132.
> Pension and post-retirement benefits; page 132.
> Taxation; page 134.
> Shareholders’ equity; page 135.
> Acquired intangible assets and goodwill; page 135.
> US GAAP condensed consolidated statement of cash flows; page 136.

This excerpt taken from the AZN 6-K filed Mar 14, 2006.
INTRODUCTION
The accompanying consolidated Financial Statements included in this Annual Report are prepared in accordance with IFRS as adopted by the EU. There are certain significant differences between IFRS and US GAAP which affect AstraZeneca’s net income and shareholders’ equity and, on pages 130 to 136, additional information under US GAAP is set out as follows:

> Summary of differences between IFRS and US GAAP accounting principles; page 130.
> Net income; page 131.
> US GAAP condensed consolidated statement of operations; page 131.
> US GAAP statement of comprehensive income; page 132.
> Stock-based compensation; page 132.
> Pension and post-retirement benefits; page 132.
> Taxation; page 134.
> Shareholders’ equity; page 135.
> Acquired intangible assets and goodwill; page 135.
> US GAAP condensed consolidated statement of cash flows; page 136.

This excerpt taken from the AZN 6-K filed Mar 14, 2006.
INTRODUCTION
The purpose of this Summary Financial Review is to provide a balanced and comprehensive analysis, including the key business factors and trends, of the financial performance of the business during 2005, the financial position as at the end of the year and the main business factors and trends which could affect the future financial performance of the business.

Our operations are focused on prescription pharmaceuticals and more than 97% of our sales are made in that sector. Sales of pharmaceutical products tend to be relatively insensitive to general economic circumstances in the short term. They are more directly influenced by medical needs and are generally financed by health insurance schemes or national healthcare budgets.

Our operating results in both the short and long term can be affected by a number of factors other than normal competition:

> The risk of generic competition following loss of patent exclusivity or patent expiry with the potential adverse effects on sales volumes and prices.
> The timings of new product launches which can be influenced by national regulators and the risk that such new products do not succeed as anticipated.
> The rate of sales growth and costs following new product launches.
> The adverse impact on pharmaceutical prices as a result of the regulatory environment. Although there is no direct governmental control on prices in the US, pressures from individual state programmes and health insurance bodies are leading to downward forces on realised prices. In other parts of the world, there are a variety of price and volume control mechanisms and retrospective rebates based on sales levels which are imposed by governments.
> Currency fluctuations, which can significantly affect our results. Our functional and reporting currency is US dollars as this is our single largest currency, but we have substantial exposures to other currencies, in particular, significant euro and Japanese yen denominated income and sterling and Swedish krona denominated costs.

Over the longer term, the success of our research and development is crucial. In common with

other pharmaceutical companies we devote substantial resources to R&D, the benefit of which emerges over the long term and carries considerable uncertainty as to whether it will generate future products.

The business events which were the most significant for our financial results in 2005 are as follows:

> Strong sales performances from our five growth products which now account for 45% of sales.
> Ten products in the portfolio with annual sales in excess of $1 billion compared to two products five years ago.
> Productivity enhancements which have allowed the containment of R&D and SG&A whilst delivering sales growth and R&D projects as planned.
> Close attention to capital expenditure and working capital management.

Taking these factors, we have delivered an operating profit margin of 27.2%, earnings per share growth (before exceptional items) of 41% and free cash flow of over $6 billion.

Other developments that were important in the year centre around our continued commitment to innovation and investment in research and development. Over the past five years we have increased our investment in R&D at an average of 8% per annum. This investment has been strengthened by accessing innovation originating outside AstraZeneca through collaborations with external partners such Cambridge Antibody Technology, Abgenix and Array, as well as the three licensing transactions announced in December and the acquisition in January 2006 of KuDOS Pharmaceuticals.

We continue to vigorously defend our intellectual property. In November we filed two lawsuits in the US District Court for the District of New Jersey.The first was against Teva Pharmaceuticals USA, Inc. and Teva Pharmaceuticals Industries, Ltd. for wilful infringement of our substance patent protecting Seroquel. The second lawsuit was filed against Ranbaxy Laboratories for wilful infringement of our patents protecting Nexium. On 18 January 2006 we announced we had received a decision of Judge Rodney Sippel of the US District Court for the Eastern District of Missouri that found

that the patents asserted by us that cover Toprol-XL were invalid and unenforceable. We disagree with and are disappointed by these conclusions. We maintain that both patents are valid and enforceable and will appeal the Court decision.

MEASURING PERFORMANCE
We use specific measures when assessing our performance in key areas as discussed below. Some of the financial measures use information derived at constant exchange rates (CER), in particular, growth rates in sales and costs, operating profit and, as a consequence, earnings per share. CER removes the effects of currency movements which allows us to focus on the changes in sales and expenses driven by volume, prices and cost levels relative to the prior period.

> Sales and cost growth expressed in CER allows management to understand the true local movement in sales and costs, in order to compare recent trends and relative return on investment.
> Earnings per share growth demonstrates not only the profitability of the business (based on profit after tax) but also the management of our capital structure (particularly through the share re-purchase programme).

Other measures used are not influenced so directly, or indeed at all, by the effects of exchange rates.

> Gross margin and operating profit margin percentages set out the progression of key performance margins and demonstrate the overall quality of the business.
> Prescription volumes and trends for growth products, which can represent the underlying business growth and the progress of individual products better and more immediately than invoiced sales.
> Free cash flow, which represents net cash flows before financing activities, as adjusted for movements in short term deposits, measuring our ability to provide returns to shareholders through dividends and the share re-purchase programme.
> Total shareholder return measures the returns we provide to our shareholders and reflects share price movements assuming reinvestment of dividends and is used in comparison to the performance of peer group companies.


Back to Contents

     
  34 AstraZeneca Annual Review 2005
 
     

 

SUMMARY FINANCIAL REVIEW CONTINUED

This excerpt taken from the AZN 6-K filed Aug 5, 2005.
Introduction
We have been engaged by the Company to review the financial information set out on pages 10,12 to 14 and 16 to 19 and we have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information.

This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Listing Rules of the Financial Services Authority. Our review has been undertaken so that we might state to the Company those matters we are required to state to it in 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 for our review work, for this report, or for the conclusions we have reached.

Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki