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AstraZeneca 6-K 2005 FORM 6-K SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Report of Foreign Issuer Pursuant
to Rule 13a-16 or 15d-16 of For July 2005 Commission File Number: 001-11960 AstraZeneca PLC 15 Stanhope Gate, London W1K 1LN, England
AstraZeneca
PLC INDEX TO EXHIBITS
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Item 1
ASTRA TECH EXPANDS THROUGH DENTAL BUSINESS Medical device company Astra Tech AB, a subsidiary of AstraZeneca PLC, is acquiring Cresco Ti Systems from its primary owners SEB Företagsinvest, Credit Suisse Innoventure Capital AG, and Banque Cantonale Vaudoise. The deal represents less than one per cent of AstraZeneca’s net assets. Cresco currently has around 30 per cent of the dental implant bridge market in Sweden. The company also has a strong position in central Europe. There is a great need for replacement of lost teeth, particularly among the growing number of elderly people. More than 240 million people in North America, Japan and Europe are missing one or more teeth. The world market for dental implants is growing at a rate of approximately 20 per cent annually. Astra Tech is growing fastest and has annual growth of over 40 per cent in the dental implant area. This is an effect of the company’s focus on research, product development and an increased presence on the major markets in Europe and the United States. The number of employees in the dental area at Astra Tech has more than doubled in the past year. Cresco’s technology and products make it possible for the patients to get bridges that fit perfectly from the start, which means that they can get their new teeth quickly. Dentists and dental technicians save time and the work is made simpler and more efficient thanks to individual fitting. The role played by the dental technicians is significant and their interaction with the dentists will be even closer. Cresco was founded in Sweden in 1987 and has had its base in Switzerland since 1998. The company has 31 employees, of which 17 are working in the Swedish company, while the remaining staff is located in Switzerland, Germany, Poland, Italy, and Spain. Sales in 2004 amounted to 4.7 million Euros. Cresco sales increased by over 70 per cent in 2004 and this strong growth is expected to continue. Cresco’s operations will be fully integrated into Astra Tech and most of the staff will be offered continued employment. Gargoyle Partners acted as exclusive financial advisors to Cresco Ti Systems NV in this transaction. Astra Tech is a subsidiary of the pharmaceutical company AstraZeneca. The company develops and produces dental implants and advanced medical devices. With its products, Astra Tech aims to improve treatment results, facilitate procedures, reduce health care costs and enhance quality of life. The Astra Tech headquarters, located in Mölndal, Sweden, house facilities for research and development as well as production. The company has subsidiaries in 14 countries in Europe, North America and Asia/Pacific and is represented by local partners in other selected markets. Astra Tech had sales of US.$256 million in 2004 and employs approximately 1,400 people. 1 July 2005 For additional information, please contact:
Peter Selley, President & CEO, Astra Tech AB, phone +46 31-7763110, mobile +46705-763110 Item 2 REPURCHASE OF SHARES IN ASTRAZENECA PLC AstraZeneca PLC announced that on 30 June 2005, it purchased for cancellation 475,000 ordinary shares of AstraZeneca PLC at a price of 2303 pence per share. Upon the cancellation of these shares, the number of shares in issue will be 1,617,484,593. G H R Musker Item 3 AstraZeneca second quarter and half year results 2005 Tomorrow, Thursday, 28 July 2005 AstraZeneca will be releasing its second quarter and half year results for 2005 at 11:00BST. An analysts’ presentation of the second quarter and half year results will take place at 13:00bst. You will be able to access the presentation via two routes: 1) Audio webcast (available at www.astrazeneca.com). You will be able to email questions to the presenters during the Q&A session. If you wish to take part in the Q&A session live rather than by e-mail you will need to dial in to the teleconference, details below. 2) Teleconference for which the numbers are in the UK: 0800 279 9640, International: +44 (0)20 7784 1004 and for the US: 866 850 2201. Printable .pdf versions (b/w) of slides will be available to download on the AstraZeneca Investor Relations website (www.astrazeneca.com/node/investor.aspx) 15 minutes before the analysts presentation begins. Details of the teleconference and webcast replay facilities available until Monday, 8 August are available on the Investor Relations part of the AstraZeneca website at www.astrazeneca.com. Item 4 The Board of AstraZeneca PLC announces the appointment of David R Brennan as Chief Executive with effect from 1 January 2006 upon the retirement at that time of Sir Tom McKillop. David Brennan is an Executive Director of AstraZeneca PLC and Executive Vice President, North America, responsible for the Company’s business in the US and Canada. Louis
Schweitzer, Chairman of AstraZeneca PLC, said: “The Board’s appointment
of David Brennan is the outcome of a rigorous selection process from a very strong list
of candidates. David has over 30 years’ experience in the pharmaceutical industry
and has played an important part in the development of AstraZeneca. With his fine
leadership qualities and a strong and talented management team, the Board is confident
that the company will continue to prosper”. 28 July 2005 Media Enquiries: Investor
Enquiries: Item 5 AstraZeneca PLCSecond Quarter and Half Year Results 2005
“Record sales and operating profit in the first half year: year end targets
All narrative in this section refers to growth rates at constant exchange rates (CER)
Sir Tom McKillop, Chief Executive, said: “Strong sales growth and productivity gains have delivered an outstanding first half performance leading to higher shareholder returns and an increase in financial targets for the full year.”
London, 28 July 2005 Interviews with Senior Executives will be available in video, audio and text on: www.astrazeneca.com or www.cantos.com. Pictures are available on www.newscast.co.uk Broadcast footage of AstraZeneca products and activities is available on www.thenewsmarket.com
AstraZeneca PLC Business Highlights All narrative in this section refers to growth rates at constant exchange rates (CER) unless otherwise indicated Second Quarter Sales in the second quarter increased 13 percent at CER, or 16 percent on an as reported basis (including a positive exchange benefit of 3 percent). Sales in the US were up 20 percent. Good sales growth was also achieved in other markets (up 8 percent); sales in Europe were up 8 percent and sales increased 10 percent in Asia Pacific. Global sales of key growth products increased 28 percent. Combined expenditures in R&D and SG&A were 3 percent lower than the second quarter 2004 (up 1 percent as reported). This spending discipline combined with the strong sales performance resulted in a 53 percent increase in operating profit. Earnings per share in the second quarter were $0.75 versus $0.48 in 2004, an increase of 40 percent. Nexium™ sales were $1,204 million in the second quarter, up 33 percent. Sales in the US were up 35 percent versus the second quarter 2004, as a result of good growth in dispensed tablet volume (up 17 percent) as well as destocking in the second quarter last year. Sales in other markets were up 28 percent. Crestor™ sales were $317 million in the second quarter. Sales in the US were $184 million, up 63 percent. Crestor™ share of new prescriptions in the US statin market was 6.2 percent in the week ending 15 July. In other markets sales were up 34 percent, with good growth in France and Italy. Sales of Iressa™ were $59 million in the second quarter, with $47 million accounted for by sales in Asia Pacific. Sales in the US were down 86 percent. Arimidex™ continues to build upon its market leading position among aromatase inhibitors for the treatment of breast cancer. Arimidex™ sales in the quarter were up 51 percent, and reached $1,007 million in the last 12 months. Symbicort™ sales were up 17 percent in the second quarter to $255 million. Seroquel™ sales were $667 million, on strong growth in the US (up 34 percent) and in other markets (up 37 percent). First HalfFor the first half, sales increased 12 percent at CER, or 15 percent on an as reported basis (including a positive exchange benefit of 3 percent). Sales in the US were up 15 percent and sales in other markets were up 8 percent. Sales for key growth products were up 25 percent in the first half, on strong performances for Nexium™ (up 22 percent), Seroquel™ (up 37 percent), Crestor™ (up 72 percent), Arimidex™ (up 50 percent) and Symbicort™ (up 21 percent). Good sales growth combined with lower expenditures in R&D and SG&A (down 3 percent at CER, in aggregate) resulted in a 44 percent increase in operating profit for the first half. Earnings per share were $1.38 compared with $0.95 last year. Future Prospects
Following two quarters of robust sales and excellent productivity gains, the Company now expects to exceed the earnings guidance set at the beginning of the year. Sales growth is now expected to approach double digits
in constant currency, and earnings per share is now anticipated to be above $2.75, implying an operating margin around 27 percent for the full year. This performance creates a platform for good earnings growth in the following two years. 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 US, continued growth in currently marketed products (in particular Crestor™, Nexium™, Seroquel™, Symbicort™, Arimidex™, and Casodex™), the growth in costs and expenses, interest rate movements, exchange rate fluctuations, and the tax rate. For further details on these and other risks and uncertainties, see AstraZeneca PLC’s Securities and Exchange Commission filings, including the 2004 Annual Report on Form 20-F. 2 AstraZeneca PLC
All narrative in this section refers to growth rates at constant exchange rates (CER) unless otherwise indicated Gastrointestinal
Cardiovascular
3 AstraZeneca PLC
Respiratory
4 AstraZeneca PLC Oncology
5 AstraZeneca PLC Neuroscience
Geographic Sales
6 AstraZeneca PLC
All narrative in this section refers to growth rates at constant exchange rates (CER) unless otherwise indicated Second Quarter Reported sales increased by 16 percent and operating profit by 63 percent. At constant exchange rates sales increased by 13 percent and operating profit by 53 percent. Reported US sales growth in the second quarter of 20 percent compares to underlying growth of 17 percent after adjusting for inventory movements and quarterly managed care accruals. For the six months underlying US growth rates approximate to reported rates although variances arise at the individual product levels. Fee for service contracts are now in place with the majority of US wholesalers. Currency benefited reported sales by 3 percent and operating profit by 10 percent. In comparison to the second quarter last year, the dollar was weaker against the euro (4 percent), benefiting sales, and also against the Swedish krona (4 percent) and sterling (3 percent), increasing costs. These currency movements, together with hedging benefits, increased earnings per share by 6 cents for the quarter. Reported operating margin increased by 8.1 percentage points from 19.9 percent to 28.0 percent. Currency benefited margin by 1.0 percentage points, implying an underlying margin improvement of 7.1 percentage points. Gross margin increased by 2.3 percentage points to 78.6 percent of sales. Currency benefited gross margin by 1.3 percentage points. Payments to Merck at 5.0 percent of sales were 0.2 percentage points higher than the second quarter last year, implying an underlying increase to margin of 1.2 percentage points resulting from improved product mix and ongoing operating efficiencies. In aggregate, R&D and SG&A expenses of $3,089 million declined 3 percent compared to last year as disciplined expenditure management and productivity improvements continue throughout the organization. In comparison to second quarter last year R&D and SG&A combined added 7.9 percentage points to operating margin. R&D expenditures decreased by 9 percent against a high comparative quarter and through a reduction in the level of external spend on manpower and contract research organization costs. SG&A cost growth was held flat mostly due to lower promotional spend as product launch costs have peaked. SG&A includes a charge of $75 million in respect of the fine levied by the European Commission for alleged Losec™ abuse of dominant position (which will be appealed). Lower other income reduced margin by 1.8 percentage points due principally to the gain on disposal of the Durascan business last year. The fair value adjustments relating to financial instruments were $2 million in quarter two, comprising a $6 million benefit in cost of sales, a $7 million charge to interest and a $3 million benefit to R&D. First HalfReported sales increased by 15 percent and operating profit by 51 percent. At constant exchange rates sales increased by 12 percent and operating profit by 44 percent. Currency benefited reported sales by 3 percent and operating profit by 7 percent. As a result of the recent strengthening of the dollar, current exchange rates would suggest approximately half of the 7 cent EPS benefit realized to date will reverse in the second half of the year. Operating margin increased by 6.4 percent from 20.3 percent to 26.7 percent. Underlying margin improvement was 6.0 percentage points for the half year with currency benefiting margin by 0.4 percentage points. Gross margin increased by 0.3 percentage points to 77.1 percent of sales. Lower payments to Merck (4.7 percent of sales) and currency benefited gross margin by 0.1 and 0.7 percentage points respectively. The resulting underlying decline of 0.5 percent is mostly attributable to fair value adjustments of exchange contracts and the costs of the termination of the Medpointe Zomig™ distribution agreement in the US in the first quarter. Cumulatively, R&D and SG&A expenses declined by 3 percent (1 percent actual growth) compared to the same period last year. The combined decline in R&D and SG&A added 7.3 percentage points to operating margin, with 2.7 percentage points from R&D and 4.6 percentage points from SG&A. 7 AstraZeneca PLC Lower other income reduced margin by 0.9 percentage points due principally to the gain on disposal of the Durascan business in the first half of last year. Fair value adjustments relating to financial instruments and impairments amounted to a $43 million charge for the half year, with $17 million charged to cost of sales, $7 million charged to interest and $19 million charged to R&D. Interest and Dividend Income Net interest and dividend income for the first half was $64 million (2004, $26 million), with $31 million in the second quarter (2004, $6 million expense). The increase over second quarter last year is primarily attributable to the higher average investment balances and yields. The reported amounts include net interest income of $11 million in the first half and $6 million in the second quarter arising from employee benefit fund assets and liabilities as required by IAS 19 together with a charge to interest in the first half of $7 million and $7 million in the second quarter related to fair value adjustments on bonds and interest rate swaps. Taxation The effective tax rate for the half year was 29.9 percent (2004, 24.2 percent). The increase is due to a different geographical mix of profits and no relief in respect of the Losec™ fine. 2004 also benefited from a one-off reduction in the deferred tax liability in relation to rolled over gains following agreements with the relevant tax authorities. For the full year the rate is anticipated to be around 29.0 percent. Cash Flow Cash generated from operating activities was $3.2 billion, $1.5 billion higher than in the first half of 2004. Higher operating profits and a reduction in working capital of $131 million were the main drivers of this, offset by an increase in tax paid to $810 million. Cash inflows from investing activities of $477 million in the half year compare with $78 million outflows in the equivalent period in 2004. The change is primarily as a result of short-term management of funds on deposit –inflows in the first half of $776 million compare with inflows of $443 million in the first half of 2004. Expenditure on property, plant and equipment fell by $172 million to $411 million. Free cash flow (which represents net cash flows before financing activities, as adjusted for movements in short term deposits) for the period was $2,855 million, an increase of $1,693 million. After accounting for net share repurchases of $1,148 million, the $1,079 million dividend payment to shareholders and foreign exchange effects, there is a $1,386 million increase in cash and cash equivalents. Net cash funds at 30 June 2005 of $4,536 million were $571 million higher than 31 December 2004.
The Board has recommended a 29 percent increase in the first interim dividend to $0.38 (21.9 pence, SEK 2.99) to be paid on 19 September 2005 to all shareholders on the register on 12 August 2005.
During the second quarter 16.6 million shares were repurchased for cancellation at a total cost of $701 million bringing the total repurchases for the first half of the year to 28.5 million shares at a total cost of $1,182 million. As previously indicated it is intended that free cash flow will be fully distributed; it is currently anticipated that share repurchases for the full year will now increase to around $3 billion. The total number of shares in issue at 30 June 2005 is 1,617 million. 8 AstraZeneca PLC
An updated R&D pipeline table is available on the Company’s website, www.astrazeneca.com, under information for investors. Summaries of results of completed clinical trials can now be found on www.astrazenecaclinicaltrials.com and details of new or ongoing hypothesis-testing studies will also be accessible through this site in compliance with the global industry position on disclosure of information. Key pipeline news include confirmation of a September US filing for Symbicort™ pMDI for asthma, the filing target for Seroquel™ in bipolar depression being brought forward to around the end of this year, and the movement of Zactima™ (AZD6474) into Phase III for treatment of solid tumours. The unexpected preclinical finding in RET mutation has now translated into positive clinical data in the rare medullary cell cancer of the thyroid. A decision has been taken to move the filing for Cerovive™ (stroke) to 2007 to allow for an increase in the size of the pivotal SAINT II trial. AZD0865 (acid-related disorders) and AZD8129 (depression/anxiety) have been withdrawn from development following review of Phase II data. The anti-arrhythmic AZD7009 intravenous Phase II programme continues but oral studies are on hold pending a review of non-cardiac side effects observed in the Phase II studies. Other changes are listed in the R&D pipeline table.
9 Item 6 Consolidated Income Statement
10 Consolidated Income Statement
11
12 Consolidated Cash Flow Statement
13 Statement of Recognised Income and Expense
14 Independent review report to AstraZeneca PLC
Introduction 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.
Directors’ responsibilities
Review work performed
Review conclusion Chartered Accountants 8 Salisbury Square London 28 July 2005 15 Notes to the Interim Financial Statements 1 BASIS OF PREPARATION AND ACCOUNTING POLICIES
2 NET CASH FUNDS
* Other non-cash adjustments in the period consist of fair value adjustments to Financial Instruments under IAS 39. 16 3 LEGAL PROCEEDINGS AND COMMITMENTS
17
18 4 HALF YEAR TERRITORIAL SALES ANALYSIS
5 SECOND QUARTER TERRITORIAL SALES ANALYSIS
19 6 HALF YEAR PRODUCT SALES ANALYSIS
20 7 SECOND QUARTER PRODUCT SALES ANALYSIS
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22 Information for US Investors RECONCILIATION TO UNITED STATES ACCOUNTING PRINCIPLES The consolidated income statement and balance sheet set out on pages 10 and 12 are prepared in accordance with IASs and IFRSs (collectively “IFRS”) expected to be endorsed by the European Union and available for use by European companies at 31 December 2005. The following is a summary of the differences between IFRS and accounting principles generally accepted in the United States (US GAAP) as they apply to AstraZeneca PLC. Purchase accounting adjustments Under IFRS, the merger of Astra and Zeneca is accounted for as a ‘merger of equals’ (pooling-of-interests) as a result of the business combinations exemption permitted by IFRS 1 ‘First-time Adoption of International Financial Reporting Standards’. Under US GAAP the merger was accounted for as the acquisition of Astra by Zeneca using ‘purchase accounting’. Under purchase accounting, the assets and liabilities of the acquired entity are recorded at fair value. As a result of the fair value exercise, increases in the values of Astra’s tangible fixed assets and inventory were recognised and values attributed to its in-process research and development and existing products, together with appropriate deferred taxation effects. The difference between the cost of investment and the fair value of the assets and liabilities of Astra was recorded as goodwill. The amount allocated to in-process research and development was, as required by US GAAP, expensed immediately in the first reporting period after the business combination. Fair value adjustments to the recorded amount of inventory were expensed in the period the inventory was utilised. Additional amortisation and depreciation have also been recorded in respect of the fair value adjustments to tangible and intangible assets. Under IFRS, up until 31 December 2002, goodwill was required to be capitalised and amortised. From 1 January 2003 goodwill is tested annually for impairment but not amortised. Under US GAAP, there is an equivalent requirement, but the effective date was 1 January 2002. Capitalisation of interest AstraZeneca does not capitalise interest under IFRS. US GAAP requires interest incurred as part of the cost of constructing fixed assets to be capitalised and amortised over the life of the asset. Deferred taxation Deferred taxation is provided on a full liability basis under US GAAP, which permits deferred tax assets to be recognised if their realisation is considered to be more likely than not. Under current IFRS, full provision is also made although there are a number of different bases on which this calculation is made, for example, the elimination of intra-group profit on inventories and share-based payment transactions. Pension and post-retirement benefits IFRS requires that in respect of defined benefit plans, obligations are measured at discounted fair value whilst plan assets are recorded at fair value. The operating and financing costs of such plans are recognised separately in the income statement; service costs are spread systematically over the lives of employees and financing costs are recognised in the periods in which they arise. US GAAP adopts a similar approach. Under IFRS, actuarial gains and losses are permitted to be recognised immediately in the statement of recognised income and expense. Under US GAAP, such actuarial gains and losses are required to be amortised on a straight-line basis over the average remaining service period of employees. A minimum pension liability is also recognised through other comprehensive income in certain circumstances when there is a deficit of plan assets relative to the accumulated benefits obligation. Intangible assets Under IFRS certain payments for rights to compounds in development are capitalised. Under US GAAP these payments are expensed. Financial instruments and hedging activities Under IFRS, financial assets and certain financial liabilities (including derivatives) are recognised at fair value; movements in the fair value may be recorded in equity or through income, depending upon their categorisation. Under US GAAP, marketable securities are recognised at fair value, with movements in fair value taken to a separate component of equity. Derivatives are also measured at fair value with movements taken through income. However, financial liabilities are recorded at amortised cost, unless hedge accounting is adopted. New accounting standards adopted AstraZeneca has adopted the provisions of SFAS No. 123 (R) ‘Share-Based Payment’ in the period under review. SFAS No. 123 (R) requires compensation cost related to share based payments to be recognised in the financial statements. AstraZeneca has used the transitional arrangements for modified retrospective application in adopting SFAS No. 123 (R). As a consequence, the comparative US GAAP income has been reduced by $53m and the shareholders’ equity at 30 June 2004 increased by $151m. 23 RECONCILIATION TO UNITED STATES ACCOUNTING PRINCIPLES (CONTINUED)
The approximate effects on income and shareholders’ equity of the GAAP differences are shown in the following tables.
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RECONCILIATION TO UNITED STATES ACCOUNTING PRINCIPLES (CONTINUED)
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The record date for the first interim dividend payable on 19 September 2005 (in the UK, Sweden and the US) is 12 August 2005. Ordinary shares will trade ex-dividend on the London and Stockholm Stock Exchanges from 10 August 2005. ADRs will trade ex-dividend on the New York Stock Exchange from the same date.
The following brand names used in these interim financial statements are trademarks of the AstraZeneca Group of companies: Accolate Arimidex Astra Tech Atacand Casodex Cefotan Crestor Diprivan Exanta Faslodex Iressa Losec Merrem Naropin Nexium Nolvadex Oxis Plendil Prilosec Pulmicort Pulmicort Respules Rhinocort Rhinocort Aqua Seloken Seroquel Symbicort Tenormin Toprol-XL Zactima Zestril Zoladex Zomig
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