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AstraZeneca 6-K 2010

Documents found in this filing:

  1. 6-K
  2. 6-K
 

FORM 6-K


SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


Report of Foreign Issuer


Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934

For January 2010

Commission File Number:  001-11960

AstraZeneca PLC

15 Stanhope Gate, London W1K 1LN, England


Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F    X              Form 40-F         

 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):            

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ______

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes                      No     X   

If “Yes” is marked, indicate below the file number assigned to the Registrant in connection with Rule 12g3-2(b):   82-_____________
 
 

 
 
AstraZeneca PLC

INDEX TO EXHIBITS
 
1.
Press release entitled, “Transparency Directive Voting Rights and Capital”, dated 4 January 2010.

2.
Press release entitled, “AstraZeneca reaches agreements with Teva Pharmaceuticals regarding Nexium and Prilosec US patent litigations”, dated 7 January 2010.

3.
Press release entitled, “AstraZeneca Fourth Quarter and Full Year Results 2009”, dated 27 January 2010.
 
4.
Press release, entitled, “Transaction by Persons Discharging Managerial Responsibilities Disclosure Rule DTR 3.1.4”, dated 27 January 2010.
 
5. 
Press release entitled, “AstraZeneca PLC Fourth Quarter and Full Year Results 2009” (front half), dated 28 January 2010.

6.
Press release entitled, “AstraZeneca PLC Fourth Quarter and Full Year Results 2009 Condensed Consolidated Statement of Comprehensive Income” (back half), dated 28 January 2010.

7.
Press release entitled, “AstraZeneca Development Pipeline” dated 28 January 2010.


 
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.


 
  AstraZeneca PLC  
     
     
     
Date: 4 February 2010
By: /s/ Justin Hoskins
 
 
Name: Justin Hoskins
 
 
Title: Deputy Company Secretary
 




 
Item 1



Transparency Directive
Voting Rights and Capital

The following notification is made in accordance with the UK Financial Services Authority Disclosure and Transparency Rule 5.6.1.  On 31 December 2009 the issued share capital of AstraZeneca PLC with voting rights is 1,450,958,562 ordinary shares of US$0.25.  No shares are held in Treasury.  Therefore, the total number of voting rights in AstraZeneca PLC is 1,450,958,562.

The above figure for the total number of voting rights may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, AstraZeneca PLC under the FSA's Disclosure and Transparency Rules.


A C N Kemp
Company Secretary
4 January 2010
 

 
Item 2
 


ASTRAZENECA REACHES AGREEMENTS WITH TEVA PHARMACEUTICALS REGARDING NEXIUM AND PRILOSEC US PATENT LITIGATIONS

AstraZeneca announced today that it has entered into an agreement with Teva Pharmaceutical Industries Ltd. and affiliates (collectively “Teva”) to settle patent litigation regarding Teva’s proposed generic version of AstraZeneca’s Nexium delayed-release capsules (esomeprazole magnesium).

As part of the Nexium settlement agreement, AstraZeneca has granted Teva a license to enter the US market with its generic esomeprazole on 27 May 2014, subject to regulatory approval, or earlier in certain circumstances. Teva has conceded that all patents-at-issue in Teva’s US Nexium patent litigations are valid and enforceable. Teva has also conceded that six Nexium patents would be infringed by the manufacture or sale of Teva’s US generic esomeprazole. The US District Court for the District of New Jersey will enter a Consent Judgment and corresponding Nexium patent litigations will be dismissed.

In a separate agreement, AstraZeneca and Teva have agreed to settle patent litigation related to Prilosec (omeprazole). Under this agreement, Teva will make a one-time payment to AstraZeneca for past infringing sales. The terms of this agreement are not financially material to AstraZeneca. AstraZeneca and Teva will jointly file a Stipulation of Dismissal with the US District Court for the Southern District of New York.

Merck Sharp & Dohme Corp. (formerly Merck & Co., Inc.) (“Merck”), through KBI Inc. and KBI-E, and under the terms of Merck's restructured partnership with AstraZeneca, announced in 1998, also entered into the settlement agreements.

About AstraZeneca
AstraZeneca is a major international healthcare business engaged in the research, development, manufacturing and marketing of meaningful prescription medicines and supplier for healthcare services. AstraZeneca is one of the world's leading pharmaceutical companies with healthcare sales of US$ 31.6 billion and is a leader in gastrointestinal, cardiovascular, neuroscience, respiratory, oncology and infectious disease medicines. For more information about AstraZeneca, please visit: www.astrazeneca.com

Media Enquiries UK:
   
Neil McCrae
+44 20 7304 5045 (24 hours)
 
Chris Sampson
+44 20 7304 5130 (24 hours)
 
Sarah Lindgreen
+44 20 7304 5033 (24 hours)
 
Abigail Baron
+44 20 7304 5034 (24 hours)
 
     
Investor Enquiries UK:
   
Jonathan Hunt
+44 207 304 5087
mob: +44 7775 704032
Karl Hård
+44 207 304 5322
mob: +44 7789 654364
Clive Morris
+44 207 304 5084
mob: +44 7710 031012
     
Investor Enquiries US:
   
Ed Seage
+1 302 886 4065
mob: +1 302 373 1361
Jorgen Winroth
+1 212 579 0506
mob: +1 917 612 4043
 
7 January 2010
 
 

 
Item 3
 
 
 
AstraZeneca Fourth Quarter and Full Year Results 2009

On Thursday, 28 January 2010, AstraZeneca will release fourth quarter and full year results for 2009 at 11:00GMT.

An analyst presentation covering the results will be held at 13:30GMT and can be joined, live, via teleconference on the following numbers:

UK: 0800 077 8491
Sweden: 0200 110 487
US: 1 866 804 8688
International: +44 (0)844 800 0810
Back-up: +44 (0)1296 317 500

Passcode: “AstraZeneca full year results analyst call”

These numbers, and details of the replay facility (available until 17:00GMT Friday, 12 February 2010) are available on the AstraZeneca Investor Relations website www.astrazeneca.com/investors and the AstraZeneca Events website: http://info.astrazenecaevents.com.

A live webcast of the presentation will also be available on these sites, as well as a recorded interview with David Brennan.
 

 
Item 4
 
 
 
Transaction by Persons Discharging Managerial Responsibilities
Disclosure Rule DTR 3.1.4

We hereby inform you that on 26 January 2010, Marcus Wallenberg, a Director of the Company, notified us that the 60,028 shares in the Company owned by him that were pledged as security against personal loans, are no longer pledged.

Accordingly, Marcus Wallenberg continues to have a total interest in 67,264 AstraZeneca PLC Ordinary Shares of USD0.25 each, which represents approximately 0.005% of the issued ordinary capital of the Company.


A C N Kemp
Company Secretary
27 January 2010
 

 
Item 5
 
AstraZeneca PLC
FOURTH QUARTER AND FULL YEAR RESULTS 2009
 

London, 28 January 2010

Revenue for the full year increased by 7 percent at constant exchange rates (CER) to $32,804 million.
 
-Sales of Toprol-XL and Novel Influenza A (H1N1) vaccine in the US accounted for 3 percentage points of the global revenue growth at CER.
 
-Emerging Markets revenue was up 12 percent at CER, accounting for 13 percent of total Company revenue for the full year.
 
Core operating profit for the full year increased by 23 percent at CER to $13,621 million on revenue growth and operational efficiencies.
 
Core EPS for the full year increased by 23 percent at CER to $6.32, in line with guidance.
 
Reported EPS for the full year increased by 22 percent at CER to $5.19.
 
Revenue in the fourth quarter increased by 4 percent at CER; Core EPS increased by 7 percent at CER.
 
Pipeline developments during the year include 4 major regulatory submissions for new products and the addition of 4 significant late stage development assets via in-licensing and acquisitions.
 
Strong cash flows result in net funds of $535 million at 31 December 2009, compared to net debt of $7,174 million at the end of 2008.
 
Dividend increased by 12 percent to $2.30 for the full year.  Board adopts a progressive dividend policy (See below).
 
The Board announces that up to $1 billion in share repurchases will be completed in 2010.
 
Restructuring programmes expanded, including newly announced plan to drive Research and Development productivity (See below).
 
Company provides mid-term planning assumptions for the 5-year period ending 2014 (See below).
 
Financial Summary
 
 Group
 
 
4th Quarter
2009
$m
   
4th Quarter
2008
$m
   
Actual
%
   
CER
%
     
Full Year
2009
$m
   
Full Year
2008
$m
   
Actual
%
   
CER
%
 
    Revenue
    8,945       8,193       +9       +4         32,804       31,601       +4       +7  
Reported
                                                                 
    Operating Profit
    2,325       1,892       +23       +13         11,543       9,144       +26       +24  
    Profit before Tax
    2,164       1,816       +19       +11         10,807       8,681       +24       +23  
    Earnings per Share
  $ 1.07     $ 0.86       +24       +16       $ 5.19     $ 4.20       +24       +22  
Core*
                                                                 
    Operating Profit
    3,044       2,685       +13       +6         13,621       10,958       +24       +23  
    Profit before Tax
    2,883       2,609       +10       +4         12,885       10,495       +23       +22  
    Earnings per Share
  $ 1.42     $ 1.25       +14       +7       $ 6.32     $ 5.10       +24       +23  
                                                                   

*
Core financial measures are supplemental non-GAAP measures which management believe enhances understanding of the Company’s performance; it is upon these measures that financial guidance for 2010 is based.  See below for a definition of Core financial measures and for a reconciliation of Core to Reported financial measures.

David Brennan, Chief Executive Officer, said>:  “In 2009 we delivered a strong financial performance, exceeding the targets we set at the beginning of the year.  In addition, good progress was made on the pipeline; we now have five products awaiting regulatory approval, and have added four significant late stage development projects through our externalisation efforts.

Our plans for the next five years confirm our commitment to research-based, innovative biopharmaceuticals.  I believe successful execution of this strategy will benefit patients and generate the cash flow necessary to
 
1

 
provide for the investment needs of the business and shareholder returns.”

Business Highlights All narrative in this section refers to growth rates at constant exchange rates (CER) unless otherwise indicated

Fourth Quarter

Revenue in the fourth quarter increased by 4 percent at CER, but was up 9 percent on an actual basis as a result of the positive impact of exchange rate movements.  Revenue benefited from strong growth of the Toprol-XL franchise in the US as a result of the market withdrawal by two generic competitors and from revenues from US government orders for vaccine for Novel Influenza A (H1N1); adjusting for these factors, global revenue was unchanged.  US revenue was up 4 percent.  Excluding Toprol-XL and H1N1 vaccine sales, US revenue was down 5 percent, due to a decline in Synagis revenue, lower levels of inventory stock building compared to last year and a provision for trade inventories of Pulmicort Respules following the launch of the Teva generic under license from the Company.  Revenue in the Rest of World was up 4 percent.  Revenue in Established Markets was up 2 percent.  Emerging Markets revenue growth was 10 percent.

Core operating profit in the fourth quarter was up 6 percent to $3,044 million.  The Core operating profit contribution from gross margin improvement was largely offset by increased expenditures in SG&A and lower other income.  The stronger than expected revenue performance for the year provided the headroom for increased investment in sales and marketing programmes to support growth in the Emerging Markets, key franchises in the US and launch preparations for the new products awaiting registration.  Higher legal expenses also contributed to the increased SG&A expense in the quarter.  Adjustments to Core operating profit were $719 million in the quarter, including $211 million of impairment charges, chiefly related to revised estimates of future other income to be derived from intangible assets acquired with MedImmune.  Total adjustments were $74 million lower than last year, reflecting significantly lower restructuring costs partially offset by higher intangible impairments and $98 million in legal provisions related primarily to an agreement in principal to settle certain claims related to average wholesale price litigation.  Reported operating profit increased by 13 percent, above the rate of Core operating profit growth, as adjusting items were a higher proportion of Core operating profit in the prior year period compared with this year.

Core earnings per share in the fourth quarter were $1.42 compared with $1.25 in the fourth quarter 2008, a 7 percent increase at CER. Reported earnings per share were up 16 percent, reflecting the aforementioned differences in Core adjustments between the periods.

Full Year

Revenue for the full year increased by 7 percent at CER, but was up 4 percent on an actual basis as a result of the negative impact of exchange rate movements.  Global revenue growth was 4 percent excluding US Toprol-XL and H1N1 vaccine sales.  Revenue in the US was up 9 percent (2 percent excluding Toprol-XL and H1N1 vaccine sales).  Revenue in the Rest of World was up 6 percent.  Revenue in Established Markets was up 4 percent.  Revenue in Emerging Markets increased by 12 percent.

Core operating profit increased by 23 percent to $13,621 million as a result of revenue growth, operating efficiencies and disposal gains within other income.  Adjustments to Core operating profit were $2,078 million, $264 million higher than last year, with lower restructuring costs and intangible impairments more than offset by the legal provisions taken in 2009. Reported operating profit increased by 24 percent, in line with the increase in Core operating profit.

Core earnings per share for the full year were $6.32, an increase of 23 percent, in line with the growth in Core operating profit.  Reported earnings per share were up 22 percent to $5.19.

Enhancing Productivity

Driving increased productivity from investments in research and development is key to portfolio renewal and value creation.  Further to this objective, the Company will undertake additional restructuring within the R&D function.  These plans include a reduction in the number of disease area targets within our core therapeutic areas, a continued focus on externalisation, some consolidation of our activities onto a smaller R&D site footprint, and other efficiency measures, subject to consultations with work councils, trades unions and other employee representatives and in accordance with local labour laws. 

These initiatives are designed to achieve material efficiency savings in R&D, which will partially mitigate the increase in R&D investment that would be required as projects in the current pipeline progress to the more resource intensive, later phases of development.  By 2014, annual savings of $1 billion should be realised, of which one-half is estimated to be cost savings and the other half cost avoidance.  Based on preliminary estimates, approximately 3,500 positions may be affected by this programme.  After taking account of positions that will be retained whilst being relocated to another site, the investment in new skills and capabilities and further expansion of our Biologics activities, the net reduction may be around 1,800 positions. 
 
2

 
The cost of this restructuring is estimated to be $1 billion, of which approximately 60 percent will be cash costs.

Good progress has been made on the implementation of previously announced restructuring programmes. During the period 2007 to 2009, $2.5 billion in restructuring costs have been incurred for these programmes, involving the reduction of 12,600 positions.  Annualised benefits of $1.6 billion have been realised by the end of 2009, which will grow to around $2.4 billion by the end of 2010.

The next phase of restructuring, which includes completion of the previous programmes, some additional initiatives in supply chain and in SG&A, and the newly announced R&D programme, will result in the realisation of a further $1.9 billion in estimated annual benefits by the end of 2014; half to be realised by 2011, with most of the remainder realised by the end of 2013. These programmes, when fully implemented, are planned to impact an additional 10,400 positions.  Additional restructuring charges of $2.0 billion are anticipated between 2010 and 2013, with approximately 60 percent to be taken in 2010, and most of the remainder by 2011.

Outlook 2010-2014

AstraZeneca is a focused, integrated, innovation-driven, global biopharmaceutical business:

·
Focused.  The Company will be selective about those areas of the industry it chooses to compete in, targeting those product categories where medical innovation or brand equity continues to command a premium in the marketplace.
·
Integrated.  The Company believes the best way to capture value within this industry is to span the full value chain of discovery, development and commercialisation.
·
Innovation-driven.  The Company believes its technology base will continue to deliver innovative products that patients will need and that payers will value.
·
Global.  The Company believes that its ability to meet the health needs of patients and healthcare systems in both the developed and Emerging Markets is a core capability.

The Company believes that pursuit of this strategy will continue to build a pipeline of new medicines that will meet the needs of patients and provide attractive returns for shareholders.

The next five years will be challenging for the industry and for the Company, as its revenue base transitions through a period of exclusivity losses and new product launches.  The Company believes it would be helpful for investors to understand the Company’s high level planning assumptions for revenue evolution, margins, cash flow and business reinvestment that will guide its management of the business over the next five years.

For the period 2010 to 2014, the Company has made certain assumptions for the industry environment.  The Company assumes that the global biopharmaceutical industry can grow at least in line with real GDP over the planning horizon.  Downward pressure on revenue from government interventions in the marketplace, including certain proposals associated with efforts to enact US healthcare reform, remain a continuing feature of the challenging market environment; however, for the planning period, the Company assumes no further “step-change” in the evolution of these pressures.  The assumptions for revenue, margins and cash flow assume no material mergers, acquisitions or disposals for the Company.  In addition, our plans assume no premature loss of exclusivity for key AstraZeneca products.  It is also assumed that exchange rates for our principal currencies don’t differ materially from the average rates that prevailed during January 2010.

The Company’s planning assumption is that revenue will be in the range of $28 billion to $34 billion per annum over the next five years.  It is expected that a significant portion of current base revenue will be affected by the loss of market exclusivity on a number of products.  The Company aims to grow market share for key franchises that retain exclusivity, and plans to sustain double-digit growth rates in its Emerging Markets business, supported by the selective addition of branded generics to the portfolio.  Achievement of revenue within the planning range will require a risk-adjusted contribution of around $4 billion to $6 billion from recently launched products, the current pipeline or from further in-licensing by 2014.  The Company aspires to achieve revenue performance nearer the top than the bottom of the planning range by 2014, when the Company’s expectation is that it will have returned to a period of more consistent revenue growth.

Based on continued productivity improvements (including successful completion of restructuring initiatives), the planning assumption is that Core operating margin, before investment in research and development (Core Pre-R&D operating margin) will be in the range of 48 to 54 percent of revenue. These levels of revenue and margins would generate strong operating cash flow over the planning period, to support the reinvestment needs of the business, debt service obligations and shareholder distributions.  Over the planning period, the Company expects that between 40 and 50 percent of its pre-R&D post tax cash flows will be reinvested in internal and external R&D and capital investments to drive future value and growth.
 
3


2010 Guidance
 
Revenue in 2010 will be affected by the expected loss of market exclusivity for Arimidex and for Pulmicort Respules in the US.  Compared to a 2009 revenue baseline that included unanticipated contributions from US sales of Toprol-XL and H1N1 pandemic influenza vaccine, the Company expects up to a mid single-digit decline in revenue in 2010 on a constant currency basis.  Core Pre-R&D operating margin is expected to be lower than 2009 in constant currency terms, but near the top of the mid-term planning range.  Based on the January 2010 average exchange rates for our principal currencies, the target for Core earnings per share is in the range of $5.75 to $6.15.

This target takes no account of the likelihood that average exchange rates for the remainder of 2010 may differ materially from the January 2010 average rates upon which our earnings guidance is based.  An estimate of the sales and earnings sensitivity to movements of our major currencies versus the US dollar is provided in conjunction with this Full Year 2009 results announcement, and can be found on the AstraZeneca website, www.astrazeneca.com/investors and http://info.astrazenecaevents.com.

Dividends and Share Repurchases

The Board has recommended a 14 percent increase in the second interim dividend to $1.71 (105.4 pence, 12.43 SEK) to be paid on 15 March 2010.  This brings the full year dividend to $2.30 (141.4 pence, 16.84 SEK), an increase of 12 percent.

In recognition of the Group’s strong balance sheet, sustainable significant cash flow, and the Board’s confidence in the strategic direction and long-term prospects for the business, the Board has adopted a progressive dividend policy, intending to maintain or grow the dividend each year.  The Board recognizes that some earnings fluctuations are to be expected as the Company’s revenue base transitions through this period of exclusivity losses and new product launches.  The Board’s view is that the annual dividend will not just reflect the financial performance of a single year taken in isolation, but reflect its view of the earnings prospects for the Group over the entirety of the investment cycle.  As a result, dividend cover may vary during the period, but with the target of an average dividend cover of 2 times (ie, a payout ratio of 50 percent), based on reported earnings (before restructuring costs).

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 conjunction with today’s financial results announcement, the Board has announced that the Company will repurchase up to $1 billion in shares during 2010.

There were no share repurchases during 2009.  In 2009, 3.5 million shares were issued in consideration of share option exercises for a total of $135 million.

The total number of shares in issue at 31 December 2009 was 1,451 million.

Research and Development Update

A comprehensive update of the AstraZeneca R&D pipeline is presented in conjunction with this Full Year 2009 results announcement, and is available on the Company’s website.

The AstraZeneca pipeline now includes 146 projects, including 103 projects in the clinical phase of development.  There are 11 NME projects currently in late stage development, either in Phase III or under regulatory review.  During 2009, across the portfolio, 53 projects have successfully progressed to their next phase (including 24 molecules entering first human testing); 29 compounds have been added from Discovery research and 20 compounds have been withdrawn.

Five important products are awaiting registration at this time:

·
Brilinta (ticagrelor), an investigational oral antiplatelet treatment for the reduction of major adverse cardiac events in patients with acute coronary syndrome (ACS), is under regulatory review in the US and in Europe.
 
·
Vimovo (naproxen/esomeprazole magnesium), a product for the treatment of the signs and symptoms of osteoarthritis, rheumatoid arthritis and ankylosing spondylitis in patients who are at risk of developing NSAID-associated ulcers, is under regulatory review in the US and in Europe.  Vimovo is a licensing collaboration between AstraZeneca and POZEN Inc.
 
·
Certriad, an investigational compound for the treatment of mixed dyslipidaemia, a combination of two or
 
4

 
 
more lipid abnormalities including high LDL-cholesterol (the “bad” cholesterol), high triglycerides and low HDL-cholesterol (the “good” cholesterol), is under regulatory review in the US.  The product is a fixed-dose combination product containing the active ingredients of Crestor (rosuvastatin calcium) and TRILIPIX™ (fenofibric acid), and is under joint development by AstraZeneca and Abbott.
   
·
Motavizumab, for the prevention of serious respiratory syncytial virus (RSV) disease in high-risk infants, is under regulatory review in the US.  Motavizumab is an investigational monoclonal antibody (MAb) with enhanced activity against RSV compared to Synagis (palivizumab).  On 24 December 2009, AstraZeneca’s biologics unit MedImmune filed its formal regulatory reply to the Complete Response Letter (CRL) received from the US FDA.  The Company received the CRL asking for additional information regarding motavizumab on 25 November 2008, and the Company has been in ongoing discussions with FDA reviewers since then to complete and file its CRL reply.
 
·
In December 2009, AstraZeneca and Bristol-Myers Squibb submitted an application with the US FDA for a fixed dose combination of ONGLYZATM (saxagliptin) plus metformin HCl extended-release tablets.

The Company was active in supplementing the pipeline with late stage projects through licensing and acquisitions during 2009, including:

·
On 12 August 2009, AstraZeneca and Forest Laboratories announced a definitive collaboration agreement to co-develop and commercialise ceftaroline in all major markets outside the United States, Canada and Japan.  Ceftaroline is Forest’s late stage, next generation cephalosporin, which is being investigated for the treatment of complicated skin and skin structure infections (cSSSI) and community-acquired bacterial pneumonia (CABP).  Ceftaroline demonstrates bactericidal activity against a broad range of pathogens commonly implicated in cSSSI and CABP, including methicillin-resistant Staphylococcus aureus (MRSA) and multi-drug resistant Streptococcus pneumoniae (MDRSP).
 
Forest has filed a New Drug Application (NDA) in the US at the end of 2009.  AstraZeneca expects to file a Marketing Authorisation Application (MAA) in Europe by the end of 2010.
 
·
On 24 September 2009, AstraZeneca and Nektar Therapeutics announced an exclusive worldwide license agreement for two drug development programmes: NKTR-118, a late stage investigational product being evaluated for the treatment of opioid-induced constipation, and the NKTR-119 programme, an early stage programme that is intended to deliver products for the treatment of pain without constipation side effects.  Both programmes were developed by Nektar, utilising their proprietary small molecule advanced polymer conjugate technology platform.
 
Under the terms of the agreement, AstraZeneca will assume responsibility for the continued development of both programmes, including the initiation of late stage clinical activities for NKTR-118.  AstraZeneca expects completion of the design of the phase III programme in the near term, and anticipates filing the drug with regulators in 2013.
 
·
On 3 December 2009, AstraZeneca and Targacept Inc. announced a collaboration and license agreement for the global development and commercialisation of TC-5214, Targacept’s late-stage investigational product for major depressive disorder (MDD).  AstraZeneca and Targacept will jointly design a global Phase III clinical programme anticipated to begin in mid 2010 with the goal of filing an NDA with the US FDA in 2012.

·
On 23 December 2009, AstraZeneca announced that it has entered into an agreement to acquire Novexel, a private infection research company based in France, and will collaborate with Forest Laboratories on the future co-development and commercialisation of two late-stage antibiotic development programmes: ceftazidime/NXL-104 (CAZ104) and ceftaroline/NXL-104 (CEF104).  These antibiotic combinations utilise Novexel’s novel investigational beta-lactamase inhibitor NXL-104 to overcome antibiotic resistance and treat the increasing numbers of infections resistant to existing therapies.
 
CAZ104, is a combination of NXL-104 and ceftazidime, a third generation cephalosporin to which resistance has emerged.  It is expected to move into Phase III development in late 2010 and to be filed with regulators in the US and EU in 2012.
 
CEF104 is a combination of NXL-104 and ceftaroline, Forest’s broad spectrum anti-MRSA cephalosporin which is currently in late stage development.  It is expected to move into Phase II development in late 2010.

Other significant developments since the third quarter update include:

Seroquel XR

On 4 December 2009, AstraZeneca announced that the US FDA has approved once-daily Seroquel XR 
 
5

 
(quetiapine fumarate) Extended Release Tablets as adjunctive (add-on) treatment to antidepressants in adults with MDD.  Seroquel XR is the only medication in its class approved by the FDA to treat both major depressive disorder as adjunctive therapy and acute depressive episodes associated with bipolar disorder as monotherapy.

Brilinta

On 15 November 2009, AstraZeneca announced results of a PLATO sub-analysis in the most serious type of Acute Coronary Syndrome (ACS) patients, those with ST Segment Elevation Myocardial Infarction (STEMI). In this setting, ST segment elevation indicates total obstruction of a coronary artery which warrants emergency surgery with angioplasty, a procedure termed primary Percutaneous Coronary Intervention or “PCI,” in order to restore flow, salvage the heart muscle (myocardium) from infarction and reduce mortality.

The sub-analysis showed that, compared to clopidogrel (Plavix®/Iscover®), treatment with ticagrelor (Brilinta) resulted in a reduction of cardiovascular events (composite of CV death, heart attack and stroke) for up to a year (ticagrelor vs. clopidogrel, 9.3% vs. 11.0%, P=0.02), without an increase in major bleeding (9.0% vs. 9.3%, P=0.63). These efficacy findings were driven by a statistically significant reduction in heart attacks (myocardial infarction) (4.7% vs. 6.1%, P=0.01).  For these STEMI patients, the benefit observed with ticagrelor increased over time.

Ticagrelor also demonstrated effects across several secondary efficacy endpoints including MI, stent thrombosis, and the composite of MI, stroke and all-cause mortality.  There was an 18% relative reduction in all cause mortality at one year from 6.0% to 4.9% (P=0.04) with ticagrelor over clopidogrel.

The pre-specified sub-analysis of the ACS STEMI patients looked at approximately 45% (8,430 patients) of the overall PLATO study population. These data were presented during the late-breaker session at the annual American Heart Association (AHA) Scientific Sessions.

Zactima

During December 2009, the phase III ZETA and ZEPHYR trials were analysed. The ZETA trial met its primary endpoint of improving progression-free survival in patients with advanced medullary thyroid cancer. The ZEPHYR trial did not meet its primary endpoint of prolonging overall survival in patients with advanced lung cancer who had previously received EGFR inhibitor therapy. Full results of these two trials will be presented at medical congresses during 2010.

Crestor

On 15 December 2009, the US FDA Endocrinologic and Metabolic Drugs Advisory Committee (EMDAC) met to discuss the supplemental New Drug Application (sNDA) filed by AstraZeneca which seeks to incorporate outcomes data from the JUPITER study into the Crestor prescribing information.

The Committee voted 12 yes, 4 no, and 1 abstention that AstraZeneca has established sufficient benefit to offset the observed risks to support the use of Crestor in individuals meeting the following criteria:

·
Men > 50 years, women > 60 years;
·
Fasting LDL < 130mg/dL; hsCRP > 2.0mg/L; triglycerides < 500mg/dL;
·
No prior history of cardiovascular or cerebrovascular events or coronary heart disease (CHD) risk equivalent as defined by NCEP ATP-III guidelines.

The FDA Advisory Committee also discussed four non-voting items related to a range of other observations in the JUPITER study, including adverse events and whether the JUPITER trial identified an appropriate new target patient population.

The Crestor sNDA remains under regulatory review; a response is anticipated during the first quarter 2010.

Revenue


All narrative in this section refers to growth rates at constant exchange rates (CER) unless otherwise indicated
 
Gastrointestinal
 
   
Fourth Quarter
   
CER %
   
Full Year
   
CER %
 
     
2009
$m
     
2008
$m
           
2009
$m
     
2008
$m
       
Nexium
    1,278       1,324       -7       4,959       5,200       -1  
Losec/Prilosec
    250       264       -12       946       1,055       -10  
Total
    1,553       1,611       -8       6,011       6,344       -2  
 
6

 
·
In the US, Nexium sales in the fourth quarter were $717 million, down 14 percent compared with the fourth quarter last year.  Dispensed retail tablet volume decreased by around 4 percent.  Average realised selling prices for Nexium were around 7 percent lower in the quarter, and around 8 percent for the year to date, in line with expectations.
 
·
Nexium sales in the US for the full year were down 9 percent to $2,835 million.
 
·
Nexium sales in other markets in the fourth quarter were up 4 percent to $561 million.  Sales in Canada were up 10 percent.  Sales in Western Europe were up 1 percent.  Sales in Emerging Markets were up 7 percent.
 
·
Nexium sales in other markets were up 9 percent for the full year to $2,124 million.
 
·
Prilosec sales in the US were down 55 percent in the fourth quarter and were down 63 percent for the full year, as a result of the entry of generic competition to the 40mg dosage form in the second half of 2008.
 
·
Sales of Losec in the Rest of World were down 6 percent in the fourth quarter.  Losec sales in the Rest of World were unchanged for the full year, as growth in Japan (up 8 percent) and China (up 21 percent) was largely offset by declines in Australia (down 62 percent) and in Western Europe (down 3 percent).

Cardiovascular
 
   
Fourth Quarter
   
CER %
   
Full Year
   
CER %
 
     
2009
$m
     
2008
$m
           
2009
$m
     
2008
$m
       
Crestor
    1,257       987       +20       4,502       3,597       +29  
Seloken /Toprol-XL
    324       207       +53       1,443       807       +84  
Atacand
    387       351       +1       1,436       1,471       +5  
Plendil
    60       67       -13       241       268       -7  
Zestril
    43       52       -23       184       236       -17  
ONGLYZATM *
    2       -       n/m       11       -       n/m  
Total
    2,227       1,803       +17       8,376       6,963       +25  

*
ONGLYZA™ is recorded as “Alliance Revenue”.  This does not represent ex-factory sales, but rather AstraZeneca’s share of the gross profit from its collaboration with Bristol-Myers Squibb on this product.

·
In the US, Crestor sales in the fourth quarter were up 13 percent to $552 million.  Crestor total prescriptions increased by nearly 20 percent, compared with 4 percent for the statin market overall.  Crestor share of total prescriptions continued to increase, reaching 11.3 percent in December 2009.
 
·
US sales for Crestor for the full year increased by 25 percent to $2,100 million.
 
·
Crestor sales in the Rest of World were up 28 percent to $705 million in the fourth quarter.  Crestor volume growth continues to run well ahead of the statin market growth in both Established and Emerging Markets.  There was strong growth in Western Europe (up 23 percent), Canada (up 23 percent), Japan (up 60 percent) and Australia (up 50 percent).  Sales in Emerging Markets were up 16 percent.
 
·
Crestor sales in the Rest of World were up 33 percent to $2,402 million for the full year.
 
·
US sales of the Toprol-XL product range, which includes sales of the authorised generic, increased by 124 percent in the fourth quarter to $197 million.  The attenuated growth rate in the fourth quarter compared to previous quarters this year reflects the impact of Watson’s launch of a generic metoprolol succinate product, which so far has been limited to the 25mg and 50mg dosage strengths.  The Watson product accounted for around 26 percent of total prescriptions for metoprolol succinate in December 2009.  The two original generic competitor products remain off the US market, and it remains difficult to ascertain when or if these products will return to the market or when potential new entrants may be approved.
 
·
Toprol-XL franchise sales in the US for the full year were up 227 percent to $964 million.
 
·
Sales of Seloken in other markets were up 1 percent in the fourth quarter and were up 2 percent for the full year on double-digit growth in Emerging Markets.
 
·
US sales of Atacand were up 3 percent in the fourth quarter and were unchanged for the full year. Atacand sales in Rest of World were up 1 percent in the fourth quarter and 5 percent for the full year.
 
·
Alliance revenue from the ONGLYZATM collaboration with Bristol-Myers Squibb totalled $11 million for the full year, as $2 million in revenue in the fourth quarter was recorded in addition to the $9 million in the third quarter,
 
7

 
  which was AstraZeneca’s share of launch stocking sales in the US following US FDA approval on 31 July 2009.
 
Respiratory and Inflammation
 
   
Fourth Quarter
   
CER %
   
Full Year
   
CER %
 
     
2009
$m
     
2008
$m
           
2009
$m
     
2008
$m
       
Symbicort
    666       514       +22       2,294       2,004       +23  
Pulmicort
    387       397       -5       1,310       1,495       -10  
Rhinocort
    65       78       -21       264       322       -15  
Oxis
    19       15       +20       63       71       -  
Accolate
    17       18       -11       66       73       -8  
Total
    1,191       1,059       +7       4,132       4,128       +6  

·
Symbicort sales in the US were $153 million in the fourth quarter, a 70 percent increase over last year. Symbicort share of new prescriptions for fixed combination products increased to 17.4 percent in December 2009, up 5.8 percentage points for the full year.  Market share of patients new to combination therapy was 25.8 percent in December 2009.
 
·
US sales of Symbicort for the full year were $488 million, an increase of 91 percent.
 
·
Symbicort sales in other markets in the fourth quarter were $513 million, 12 percent ahead of the fourth quarter last year.  Sales in Western Europe were up 9 percent.  Emerging Markets sales were up 25 percent in the quarter.
 
·
Symbicort sales in the Rest of World for the full year were up 13 percent to $1,806 million.
 
·
US sales of Pulmicort in the fourth quarter were down 12 percent to $230 million.  As expected, Teva re-launched its generic budesonide for inhalation suspension product (BIS), under license from AstraZeneca, on 15 December 2009.  Despite launching late in the quarter, Teva’s BIS product market share of dispensed BIS prescriptions was 16 percent in the fourth quarter, as this includes pharmacies dispensing from stocks remaining from Teva’s “at risk” launch shipments at the end of 2008.  Reported sales in the fourth quarter 2009 were reduced by a return provision against trade inventory following the launch of the Teva generic.
 
·
US sales of Pulmicort for the full year were down 18 percent to $804 million.
 
·
Sales of Pulmicort in the Rest of World for the full year were up 4 percent to $506 million.

Oncology
 
   
Fourth Quarter
   
CER %
   
Full Year
   
CER %
 
     
2009
$m
     
2008
$m
           
2009
$m
     
2008
$m
       
Arimidex
    499       451       +6       1,921       1,857       +7  
Casodex
    189       284       -38       844       1,258       -34  
Zoladex
    300       278       +1       1,086       1,138       -  
Iressa
    79       73       +3       297       265       +8  
Faslodex
    72       61       +11       262       249       +10  
Nolvadex
    24       23       -4       88       85       -  
Ethyol
    4       5       -20       15       28       -46  
Total
    1,169       1,195       -8       4,518       4,954       -7  
 
·
In the US, sales of Arimidex were up 24 percent in the fourth quarter to $220 million.  Total prescriptions for Arimidex were down 3.5 percent, slightly greater than the 2 percent decline in the market for hormonal treatments for breast cancer.
 
·
US sales of Arimidex for the full year were up 16 percent to $878 million.
 
·
Arimidex sales in other markets were down 6 percent in the fourth quarter. For the full year, sales were unchanged.
 
·
Casodex sales in the US in the fourth quarter were down 77 percent to $18 million following FDA approval of 8 generic bicalutamide products in July.  Casodex sales in the US for the full year were down 49 percent to $148 million.
 
·
Casodex sales in the Rest of World in the fourth quarter were down 24 percent to $171 million as a result of
   
8

 
 
generic competition in Western Europe, where sales were down 45 percent, and in Japan, where sales were down 17 percent.  For the full year, sales in the Rest of World were down 29 percent to $696 million.
   
·
Iressa sales increased by 8 percent to $297 million for the full year, including $7 million of sales in Western Europe following EU regulatory approval in July.  There were double-digit sales increases in Japan and in China for the full year.
 
·
Faslodex sales for the full year increased by 5 percent in the US and grew by 15 percent in the Rest of World.

Neuroscience
 
   
Fourth Quarter
   
CER %
   
Full Year
   
CER %
 
     
2009
$m
     
2008
$m
           
2009
$m
     
2008
$m
       
Seroquel
    1,261       1,160       +6       4,866       4,452       +12  
Zomig
    115       112       -3       434       448       -  
Total
    1,636       1,495       +5       6,237       5,837       +10  

·
In the US, Seroquel sales were up 5 percent to $872 million in the fourth quarter.  Total prescriptions for the Seroquel franchise increased by 1 percent in the fourth quarter, whilst total prescriptions for Seroquel XR more than tripled compared to the fourth quarter 2008.  Market share for the Seroquel franchise was a market-leading 31.3 percent in December 2009 (unchanged in the quarter) of which 3.5 percentage points were for Seroquel XR, which was up 51 basis points.  Seroquel XR accounted for 11 percent of total prescriptions for the franchise in December 2009.
 
·
US sales of Seroquel for the full year were $3,416 million, 13 percent ahead of last year.
 
·
Seroquel sales in the Rest of World were $389 million in the fourth quarter, an 8 percent increase despite the 52 percent decline in Canada due to generic competition.  Sales growth was driven by the performance of Seroquel XR, which accounted for 24 percent of franchise sales in the Rest of World markets in 2009. Seroquel sales in Western Europe were up 11 percent. Sales in Emerging Markets were up 13 percent.
 
·
For the full year, Seroquel sales in the Rest of World increased by 8 percent to $1,450 million.

Infection and Other

   
Fourth Quarter
   
CER %
   
Full Year
   
CER %
 
     
2009
$m
     
2008
$m
           
2009
$m
     
2008
$m
       
Synagis
    401       506       -21       1,082       1,230       -12  
Merrem
    236       217       +3       872       897       +5  
FluMist
    51       33       +55       145       104       +39  
Non seasonal flu vaccine
    237       -       n/m       389       -       n/m  
Total
    955       805       +17       2,631       2,451       +10  
 
·
In the US, sales of Synagis in the fourth quarter were down 31 percent to $263 million, as new guidelines published by the COID have restricted usage at the start of the RSV season.  US sales for the full year were down 15 percent to $782 million.  Outside the US, Synagis sales in the fourth quarter were up 10 percent to $138 million.  For the full year, sales in Rest of World were down 2 percent, reflecting year on year timing differences in shipments to Abbott, our international distributor, rather than underlying demand trends.
 
·
FluMist sales for the full year were $145 million, a 39 percent increase over last year.
 
·
Revenue of $237 million related to US government orders for Live Attenuated Influenza Vaccine (LAIV) against Novel Influenza A (H1N1) were recorded in the fourth quarter, bringing the total for the full year to $389 million.  The total value of the contract was approximately $453 million.  How much of the remaining revenue balance will be recorded in 2010 will depend on the US government’s assessment of its vaccine needs in the light of the severity of the outbreak and projected vaccination rates.
 
This project has been funded in whole or in part with Federal funds from HHS/ASPR/BARDA, under Contract No. HHS01002009000021.
 
9


 
Geographic Sales

   
Fourth Quarter
   
CER %
   
Full Year
   
CER %
 
     
2009
$m
     
2008
$m
           
2009
$m
     
2008
$m
       
North America
    4,288       4,080       +4       15,981       14,785       +9  
  US
    3,947       3,784       +4       14,778       13,510       +9  
Established ROW*
    3,492       3,090       +2       12,471       12,543       +4  
Emerging ROW
    1,165       1,023       +10       4,352       4,273       +12  

*
Established ROW comprises Western Europe (including France, UK, Germany, Italy, Sweden, and others), Japan, Australia and New Zealand.

·
In the US, revenue increased by 9 percent for the full year.  In addition to the revenue upsides from Toprol-XL and H1N1 influenza vaccine sales, Crestor, Seroquel and Symbicort were also drivers of revenue growth, more than offsetting declines in Nexium, Pulmicort Respules, Casodex and Prilosec.
 
·
Revenue in the Established Rest of World segment was up 4 percent for the full year.  Revenue in Western Europe was up 3 percent, as growth for Crestor, Symbicort, Seroquel and Nexium more than offset generic erosion on Casodex and declines in the mature cardiovascular products.  Revenue in Japan was up 7 percent, with most of the growth coming from Crestor.  Crestor was largely responsible for the 12 percent revenue increase in Australia.
 
·
Revenue in Emerging Markets was up 12 percent for the full year, with 60 percent of the growth coming from the 5 key brands, and the balance from the broader portfolio.  Revenue in China was up 27 percent.
 
 
Operating and Financial Review

 
All narrative in this section refers to growth rates at constant exchange rates (CER) and on a Core basis unless otherwise indicated.  These measures, which are presented in addition to our Reported financial information, are non-GAAP measures which management believe useful to enhance understanding of the Group’s underlying financial performance of our ongoing businesses and the key business drivers thereto.  The Core financial measure is adjusted to exclude certain significant items, such as charges and provisions related to our global restructuring and synergy programmes, amortisation and impairment of the significant intangibles relating to our acquisition of MedImmune Inc. in 2007 and our current and future exit arrangements with Merck in the US, and other specified items.  More detail on the nature of each of these adjustments is given in our Annual Report and Form 20-F Information 2008.  During the second quarter, the Group enhanced its methodology for calculating growth rates in constant currency terms.  The constant exchange growth rates (CER) disclosed for the second half of 2009 have been calculated using the updated methodology.
 
Fourth Quarter

All financial figures, except earnings per share, are in $ millions.  Weighted average shares in millions.

   
Reported
2009
   
Restructuring
and Synergy Costs
   
Merck &
MedImmune
Amortisation
   
Intangible
Impairments
   
Legal
Provisions
   
Core
2009
   
Core
2008
   
Actual
%
   
CER
%
 
Revenue
    8,945       -       -       -       -       8,945       8,193       9       4  
Cost of Sales
    (1,665 )     49                               (1,616 )     (1,835 )                
Gross Profit
    7,280       49       -       -       -       7,329       6,358       15       11  
% sales
    81.4 %                                     81.9 %     77.6 %     +4.3       +4.9  
Distribution
    (91 )     -       -       -       -       (91 )     (71 )     29       22  
% sales
    1.0 %                                     1.0 %     0.8 %     -0.2       -0.1  
R&D
    (1,314 )     38       -       6       -       (1,270 )     (1,245 )     2       1  
% sales
    14.7 %                                     14.2 %     15.2 %     +1.0       +0.4  
SG&A
    (3,465 )     198       104       -       98       (3,065 )     (2,570 )     19       16  
% sales
    38.7 %                                     34.3 %     31.4 %     -2.9       -3.5  
Other (Expense)/ Income
    (85 )     -       21       205       -       141       213       (34 )     (45 )
% sales
    1.0 %                                     1.6 %     2.6 %     -1.0       -1.2  
Operating Profit
    2,325       285       125       211       98       3,044       2,685       13       6  
% sales
    26.0 %                                     34.0 %     32.8 %     +1.2       +0.5  
Net Finance Expense
    (161 )     -       -       -       -       (161 )     (76 )                
Profit before Tax
    2,164       285       125       211       98       2,883       2,609       10       4  
Taxation
    (602 )     (84 )     (28 )     (63 )     (34 )     (811 )     (785 )                
Profit after Tax
    1,562       201       97       148       64       2,072       1,824       14       7  
Non-controlling Interests
    (9 )     -       -       -       -       (9 )     (11 )                
Net Profit
    1,553       201       97       148       64       2,063       1,813       14       8  
Weighted Average Shares
    1,450       1,450       1,450       1,450       1,450       1,450       1,447                  
Earnings per Share
    1.07       0.14       0.07       0.10       0.04       1.42       1.25       14       7  
 
10

 
Revenue grew by 4 percent in the fourth quarter to $8,945 million.

Core gross margin of 81.9 percent in the fourth quarter was 4.9 percentage points higher than last year. Lower payments to Merck (0.5 percentage points), lower intangible asset impairments and provisions (3.1 percentage points) and continued efficiency gains and mix factors (2.0 percentage points) were partially offset by higher royalty payments (0.7 percentage points).

Core R&D expenditure was $1,270 million in the fourth quarter, 1 percent higher than last year, as increased investment in biologics and higher charges relating to intangible asset impairments were partially offset by continued productivity initiatives and lower project costs resulting from several late stage development projects completing their Phase III programmes and progressing to pre-registration.

Core SG&A costs of $3,065 million in the fourth quarter were 16 percent higher than last year.  Stronger than expected revenue performance provided the opportunity to drive future growth through increased marketing investment for Emerging Markets and currently marketed brands, and to support launch planning for the new products awaiting registration.  SG&A expense growth also included increased legal expenses and impairment of intangible assets related to information systems, which were only partially offset by operational efficiencies.

Core other income of $141 million was $72 million lower than the fourth quarter of 2008, chiefly on expected lower one-time gains and lower HPV royalties.

Core operating profit was $3,044 million, an increase of 6 percent at CER, or 13 percent on an actual basis. In comparison with last year against the dollar, the euro was 12 percent stronger (increasing sales and costs), the Swedish krona was 11 percent stronger (increasing costs) and sterling was 4 percent stronger (increasing costs). Core operating margin increased by 0.5 percentage points to 34.0 percent of revenue as result of leveraging sales growth and lower intangible asset impairments within Cost of Sales.

Core earnings per share in the fourth quarter were $1.42, up 7 percent, as the increase in Core operating profit and a lower effective tax rate were only partially offset by higher net finance expense.

Reported operating profit was up 13 percent to $2,325 million. Reported earnings per share were $1.07 up 16 percent.

Full Year

All financial figures, except earnings per share, are in $ millions.  Weighted average shares in millions.

   
Reported
2009
   
Restructuring
and Synergy Costs
   
Merck &
MedImmune
Amortisation
   
Intangible
Impairments
   
Legal
Provisions
   
Core
2009
   
Core
2008
   
Actual
%
   
CER
%
 
Revenue
    32,804       -       -       -       -       32,804       31,601       4       7  
Cost of Sales
    (5,775 )     188       -       -       -       (5,587 )     (6,193 )                
Gross Profit
    27,029       188       -       -       -       27,217       25,408       7       10  
% sales
    82.4 %                                     83.0 %     80.4 %     +2.6       +2.4  
Distribution
    (298 )     -       -       -       -       (298 )     (291 )     3       13  
% sales
    0.9 %                                     0.9 %     0.9 %     -       -  
R&D
    (4,409 )     68       -       7       -       (4,334 )     (4,953 )     (13 )     (3 )
% sales
    13.5 %                                     13.2 %     15.7 %     +2.5       +1.5  
SG&A
    (11,332 )     403       403       -       636       (9,890 )     (9,940 )     (1 )     5  
% sales
    34.5 %                                     30.2 %     31.4 %     +1.2       +0.8  
Other Income
    553       -       108       265       -       926       734       26       26  
% sales
    1.7 %                                     2.8 %     2.3 %     +0.5       +0.4  
Operating Profit
    11,543       659       511       272       636       13,621       10,958       24       23  
% sales
    35.2 %                                     41.5 %     34.7 %     +6.8       +5.1  
Net Finance Expense
    (736 )     -       -       -       -       (736 )     (463 )                
Profit before Tax
    10,807       659       511       272       636       12,885       10,495       23       22  
Taxation
    (3,263 )     (199 )     (125 )     (82 )     (34 )     (3,703 )     (3,056 )                
Profit after Tax
    7,544       460       386       190       602       9,182       7,439       23       22  
Non-controlling Interests
    (23 )     -       -       -       -       (23 )     (29 )                
Net Profit
    7,521       460       386       190       602       9,159       7,410       24       22  
Weighted Average Shares
    1,448       1,448       1,448       1,448       1,448       1,448       1,453                  
Earnings per Share
    5.19       0.32       0.27       0.13       0.41       6.32       5.10       24       23  

Revenue grew by 7 percent for the full year to $32,804 million.
 
11

 
Core gross margin of 83.0 percent for the full year was 2.4 percentage points higher than last year. Lower payments to Merck (0.6 percentage points), the impact of the release of a provision with respect to the resolution of an issue related to a third party supply contract in the third quarter (0.5 percentage points), lower intangible asset impairments and provisions (0.8 percentage points) and continued efficiency gains and mix factors (1.4 percentage points) were partially offset by higher royalty payments (0.9 percentage points).

Core R&D expenditure was $4,334 million for the full year, 3 percent lower than last year, as increased investment in biologics was more than offset by the continued productivity initiatives and lower costs associated with late stage development projects that have progressed to pre-registration.

Core SG&A costs of $9,890 million for the full year were 5 percent higher than last year, as increased marketing investment in Emerging Markets and currently marketed brands, and supporting the launch planning for the new products awaiting registration, were partially offset by operational efficiencies across the business.

Core other income of $926 million was $192 million higher than 2008, chiefly as a result of the Abraxaneâ and Nordic OTC disposals in the first half of the year.

Core operating profit was $13,621 million, an increase of 23 percent. Core operating margin increased by 5.1 percentage points to 41.5 percent of revenue, as a result of sales growth, efficiencies across the cost base, lower R&D spend and the disposals within other income.

Core earnings per share for the full year were $6.32, an increase of 23 percent in line with the increase in core operating profit as higher net finance expense was offset by a lower effective tax rate and the benefit of a lower average number of shares outstanding during the previous year.

Reported operating profit was up 24 percent to $11,543 million, including $636 million of legal provisions. Reported earnings per share were $5.19 up 22 percent.

Finance Income and Expense

Net finance expense was $736 million for the year ($161 million for the quarter), versus $463 million in 2008 ($76 million for the quarter). The key drivers were the continued reversal of the fair value gain as described below, reduced interest received due to lower interest rates, a higher net interest expense on pension obligations, partially offset by reduced interest payable on lower debt balances.

Net finance expense included a net fair value loss of $15 million for the quarter ($82 million gain in Q4 2008) and $145 million for the year ($130 million gain in 2008) largely due to credit spreads reducing through 2009.  As outlined in the full year 2008 results, the net fair value gain of $130 million recorded mainly related to two long-term bonds. These bonds are swapped to floating interest rates and accounted for using the fair value option under IFRS. Under this accounting treatment both the bonds and the related interest rate swaps are measured at fair value, with changes in fair value reported in the income statement. The fair value of each instrument reflects changes in market interest rates, which broadly offset, but the fair value of these bonds also reflects changes in credit spreads.  The 2008 gain has now reversed fully in 2009 and, as credit spreads continued to reduce in Q4, further losses have been recorded.

The Company anticipates that net finance expense for 2010 will be approximately $550 million.

Taxation

The effective tax rate for the fourth quarter is 27.8 percent (2008 30.7 percent) and 30.2 percent for the year (2008 29.4 percent). Excluding the impact of the legal provisions ($98 million for the fourth quarter and $636 million for the year) the effective tax rate for the fourth quarter would be 28.1 percent and 28.8 percent for the year. The full year tax rate for 2010 is currently anticipated to be around 29 percent. Further details relating to the tax position are set out in Note 4.

Cash Flow

Cash generated from operating activities was $11,739 million in the year to 31 December 2009, compared with $8,742 million in 2008.  The improvement of $2,997 million is primarily driven by the increase in cash generated from operations of $3,118 million, reflecting the strong underlying performance and improved working capital management, partially offset by an increase in tax payments of $172 million.

Net cash outflows from investing activities were $2,476 million in the year compared with $3,896 million in 2008. The reduction of $1,420 million is due primarily to the payment of $2,630 million to Merck in 2008 as part of the partial retirement, and the proceeds from the disposal of the Abraxane® co-promotion rights of $269 million received in 2009, countered by an increase in the purchase of short-term investments and fixed deposits of
 
12

 
$1,372 million.

Cash distributions to shareholders were $2,977 million through payment of the second interim dividend from 2008 and the first interim dividend for 2009.

Debt and Capital Structure

As at 31 December 2009, outstanding gross debt (interest bearing loans and borrowings) was $11,063 million (31 December 2008: $11,848 million). The reduction in gross debt of $785 million during the year was principally due to the repayment on maturity of the two–year $650 million Floating Rate Note (issued in September 2007). Of the gross debt outstanding at 31 December 2009, $1,926 million is due within one year (31 December 2008: $993 million) of which $717 million was repaid on the 4 January 2010, relating to the Euro 500 million 18 month bond issued in July 2008. Strong business cash flows have reduced net debt by $7,709 million since 31 December 2008 to net funds of $535 million as at 31 December 2009.
 
Calendar


16 March 2010
Emerging Markets investor presentation
29 April 2010
Announcement of first quarter 2010 results
29 April 2010
Annual General Meeting
29 July 2010
Announcement of second quarter and half year 2010 results
28 October 2010
Announcement of third quarter and nine months 2010 results

David Brennan
Chief Executive Officer

 
Media Enquiries:
Neil McCrae (London)
(020) 7304 5045
 
Chris Sampson/Sarah Lindgreen/Abigail Baron (London)
(020) 7304 5130/5033/5043
 
Tony Jewell (Wilmington)
(302) 885 4594
 
Ann-Leena Mikiver (Södertälje)
(8) 553 260 20
     
Analyst/Investor Enquiries
Karl Hård (London)
(020) 7304 5322
 
Jonathan Hunt (London)
(020) 7304 5087
 
Clive Morris (London)
(020) 7304 5084
 
Ed Seage/Jörgen Winroth (US)
(302) 886 4065/(212) 579 0506

An interview with David Brennan, Chief Executive Officer is available on www.astrazeneca.com and http://info.astrazenecaevents.com

 
 
13

 

Item 6
 
 
 
Condensed Consolidated Statement of Comprehensive Income
 
For the year ended 31 December
  $ 2009 m     $ 2008 m  
Revenue
    32,804       31,601  
Cost of sales
    (5,775 )     (6,598 )
Gross profit
    27,029       25,003  
Distribution costs
    (298 )     (291 )
Research and development
    (4,409 )     (5,179 )
Selling, general and administrative costs*
    (11,332 )     (10,913 )
Other operating income and expense
    553       524  
Operating profit
    11,543       9,144  
Finance income
    462       854  
Finance expense
    (1,198 )     (1,317 )
Profit before tax
    10,807       8,681  
Taxation
    (3,263 )     (2,551 )
Profit for the period
    7,544       6,130  
Other comprehensive income:
               
Foreign exchange arising on consolidation
    388       (1,336 )
Foreign exchange differences on borrowings forming net investment hedges
    (68 )     291  
Gain on cash flow hedge in connection with debt issue
    1       1  
Net available for sale gains taken to equity
    2       2  
Actuarial loss for the period
    (569 )     (1,232 )
Income tax relating to components of other comprehensive income
    192       368  
Other comprehensive income for the period, net of tax
    (54 )     (1,906 )
Total comprehensive income for the period